China Telecom's (the "Company") 2022 interim results were generally in line with market consensus and our estimations. Service revenue increased by 8.8% yoy to RMB221.4 billion, while sales of terminals increased by 33.0% yoy to RMB20.9 billion; the Company's total operating revenue increased by 10.5% yoy to RMB242.3 billion. Total operating expenses increased by 10.7% yoy, as a result, EBITDA as a percentage of service revenue decreased by 1.0 ppt yoy to 31.6% and EBITDA rose by 5.3% yoy. Shareholders' net profit was up by 3.1% yoy to RMB18,291 million while shareholders' net profit excluding extraordinary gains and losses increased by 12.1% yoy.
We expect service revenue to still grow steadily in 2H22. In 1H22, mobile communications service revenue increased by 6.0% yoy to RMB98,956 million; mobile ARPU slightly increased by 0.7% yoy to RMB46.0. In 1H22, the Company achieved net addition in mobile subscribers of 11.79 million YTD to reach 384 million. The Company plans to add more than 15 million mobile subscribers in 2022. As at 1H22, the proportion of 5G subscribers increased by 9.9 ppt YTD to 60.3%. We expect 5G subscribers to still grow with the expanding coverage of 5G networks and to increase by about 80 million in 2022, however, we expect that pulling effect of 5G on ARPU will not be significant currently and mobile ARPU to be stable in 2H22. Due to steadily rising numbers of mobile users, we expect mobile communications service revenue to grow steadily yoy in 2H22. In 1H22, revenue from broadband access and Smart Family increased yoy by 4.4%, of which Smart Family revenue soared 12.2% yoy led by home smart upgrades, community smart management and rural digital governance; broadband blended ARPU increased by 0.9% yoy to RMB47.2. The Company expects to add 8 million wireline broadband subscribers in 2022 and 1H22 data indicated 5.73 million were added in the period.
Due to the increase in number of wireline broadband subscribers and the value contribution brought by Smart Family, we expect wireline business to maintain steady growth in 2H22. In 1H22, revenue from industrial digitalization business went up by 19.0% yoy to RMB58,932 million, accounting for 26.6% of the total service revenue and the Company expects the proportion will rise to 30% in 2024. Due to strong demand from the government and enterprise markets, the Company's leading position in cloud market and IDC sources and the "east-to-west computer resource transfer" project, we expect industrial digitalization business to grow by over 15% yoy in 2H22.
We expect operating expenses to still grow rapidly in 2H22. In 1H22, total operating expenses went up 10.7% yoy. Network operations and support expenses increased by 9.6% yoy, in order to support the development of 5G and industrial digitalization development; due to the investment in R&D and sci-tech innovation, selling, general and administrative (SG&A) expenses rose by 11.4% yoy; in order to increase incentives to attract talent, personnel expenses increased by 12.4% yoy. We expect network operations and support expenses, SG&A expenses, as well as personnel expenses as a percentage of total service revenue to still slightly increase in 2H22. We expect the growth rate of cost of goods sold to be still basically in line with the growth rate of sales of terminals. Overall, we expect that EBITDA as a percentage of service revenue will decrease yoy but EBITDA will increase steadily yoy in 2H22.
We maintain the TP at HK$3.55 and the investment rating as "Buy". We expect shareholders' net profit to increase steadily yoy. The Company announced interim dividend of RMB0.12 per share, and the dividend payout ratio reached 60%. Given steadily rising profitability and strong cash position, we expect the dividend payout to exceed market expectations in the future. Thus, we maintain the investment rating as "Buy".