On January 25, Datang Telecom issued an announcement which said the company’s annual net profit attributable to shareholders in 2017 is expected to be a loss compared to the same period last year (statutory disclosure data), the net profit attributable to shareholders is CNY -2 to -2.4 billion in 2017 and CNY -1.8 billion in 2016.
According to the announcement, telecom industry was still under fierce competition in 2017. In the field of chip, the upgrade has accelerated and competition become more intense; the game market further concentrated and shares of certain game companies further increased; in addition, information industry including education, hydraulic engineering, smart city, highway and others also faced increasing competition. Under this circumstance, the company continued to promote transformation and upgrading, by abandoning low-margin business, revenue of the company's main business decreased over 30% compared with last year, although overall gross margin increased, it’s far from making the company achieve profitability.
At the same time, the subsidiary company in game industry suffered significant decrease in value due to sharp drop in performances; some customers experienced a tight budget, causing part of contracts stalled in execution or in legal disputes, based on the prudence principle, the company intends to accrue provision for bad debts of related accounts receivable balance, which caused a great negative impact on the profit of 2017; part of the company’s inventory and intangible assets also suffered depreciation pressure due to technology upgrades.
According to relevant provisions of Rules Governing the Listing of Stocks on Shanghai Stock Exchange, Datang Telecom stock may be implemented by the Shanghai Stock Exchange for delisting risk warning (added with ST in front of the company's stock abbreviation) due to losses in two consecutive years.