China Netcom Group Corp., one of the country's main fixed-line telecommunications providers, on Monday reported a first-half net profit of 5.88 billion yuan (US$859 million), up 11.9 percent from the same period last year.

The company said in its half-year report that income, which excluded connection fees, stood at 40.62 billion yuan, down by 0.15 percent over the same period last year.

Although connection fees were stopped in 2001, some users amortized the debt over 10 years.

China Netcom said its traditional fix-line phone services faced great challenges from the growing mobile phone market.

The company had 108.51 million local fixed-line telephone customers by June, representing a decrease of 2.31 million from 2007. The reduction included 1.49 million fixed-line phone users and 811,000 smart phone users.

Revenue from local fixed-line services was 9.07 billion yuan in the first six months, down 12 percent over the same period a year earlier.

However, China Netcom said it has made up its losses in fixed-line services by introducing new and high-tech services. "Revenue from new services, including broadband service, hit 16.48 billion yuan by June, up 26.2 percent over the same period last year," said the report.

China Netcom had 23.36 million broadband customers in the first half, up by 3.59 million from last year.

Meanwhile, capital expenses fell 10.7 percent to 7.53 billion yuan.

China Netcom is in the midst of a proposed merger with China Unicom, as part of government plans to restructure China's telecoms industry. The government hopes to boost competition by creating three carriers, each with mobile and fixed-line assets.

The others will be formed around China Unicom's bigger rival, China Mobile Ltd., and China's biggest fixed-line carrier, China Telecom Ltd.

Hong Kong-listed China Netcom's shares gained 4.2 percent on Monday to close at 21 Hong Kong dollars.

(Xinhua News Agency August 26, 2008)