China Telecom started selling a version of Apple’s iPhone 4S compatible with its CDMA2000 network on March 16. China Telecom offers black and white versions of the iPhone 4S in 16 GB, 32 GB and 64 GB versions, some of which will be free under certain contracts. Users who sign a two-year contract at a monthly fee of CNY389 will get a 16 GB handset free of charge. Lower contract fees provide a competitive edge over China Unicom’s iPhone offers. A two-year contract for the 32 GB model only requires a monthly payment of CNY489, which is CNY97 less than the same offer from China Unicom. The speed offered by China Unicom’s 3G network is on average four times faster than that of China Telecom, said Xu Zhen, Telecommunications Specialist with d1net.com, an information technology portal. China Telecom said Apple’s iPhone will be good for its long-term development but might bring short-term profit pressure. Independent analyst Xiang Ligang said cooperation with Apple will not initially offer China Telecom short-term profits. “The carrier spends a lot of money on mobile phone subsidies, and the result is, at the moment, the more iPhones they sell, the more money they lose,” Xiang said. China Telecom spent CNY15.6 billion in 2011 on handset subsidies, up 29.1% from 2010, and sees no let-up for the moment. “The amount of money we’ll spend on mobile phone subsidies this year will not be less than last year,” Chief Financial Officer Wu Andi said, although mobile handset subsidies as a percentage of mobile service revenue will continue to fall, “if subsidies on iPhones aren’t included”. The figure has already declined to 22.9% in 2011 from 33.6% in 2009. The company has set 2012 capital expenditure at about CNY54 billion, up 9% from 49.6 billion in 2011, and 70% of the money is earmarked for upgrading broadband networks. China Telecom said 2011 profit rose 10.5% to CNY16.4 billion, as growing use of mobile phones offset a decline in its traditional fixed-line business. Revenue rose 11.7% to CNY245 billion.