SHANGHAI, Aug. 29 -- CHINA Telecom Corp, the nation's biggest fixed-line phone operator, reported that second-quarter profit missed analyst estimates after users signed up for cheaper rates at mobile carriers.

Net income was 5.68 billion yuan (US$752 million), unchanged from a year earlier, Beijing-based China Telecom said yesterday. Earnings, which excluded gains from connection fees, lagged behind the 5.9 billion yuan median profit estimate of six analysts in a Bloomberg News survey. Sales rose 3.8 percent.

China Mobile Ltd and China Unicom Ltd signed up 10 times as many users as fixed-line operators in the first half after cutting rates. China Telecom has expanded Internet services to spur growth and plans to enter the mobile-phone market once third-generation licenses are issued.

"In terms of growth rate, the mobile business is better than fixed lines as more and more people use cell phones," said Teresa Chow, who helps manage US$500 million, including China Mobile shares, at RBC Investment Management Asia in Hong Kong. "Fixed-line operators are finding it difficult to compete."

In November 2002, China Telecom pared its initial stock sale by 60 percent and sold the shares at the bottom of the price range as concerns over competition for fixed-line operators damped investor appetite. The stock has tripled from the initial sale price of HK$1.48 (19 US cents), while the benchmark Hang Seng Index more than doubled.

Second-quarter sales rose to 44.30 billion yuan from 42.68 billion yuan a year earlier.

China's government in 2001 stopped connection fees, a one-time charge for linking fixed-line users to an operator's main network. The charges are being amortized over 10 years by China Telecom and China Netcom Group Corp (Hong Kong) Ltd, the second-largest fixed-line company in the nation.

China, the world's biggest mobile market by users, had 501.7 million wireless-phone subscribers at the end of June, exceeding the 372.7 million fixed-line customers.

"We expect further pressure from mobile substitution in the second half," said Jeffrey Tan, an analyst at Credit Suisse in Hong Kong. Tan has a "neutral" rating on shares of China Telecom.

The company added 1.5 million fixed-line customers in the six months ended June 30, down 83 percent from a year earlier.