Netcom's earnings were 12.96 billion yuan ($1.7 billion), down from 13.89 billion yuan ($1.79 billion), the Beijing-based fixed-line provider said. Revenues rose just over 1% to 86.9 billion yuan ($11.2 billion).
The number of subscribers stood at 114.9 million, representing the first decline in Netcom's history from 119.4 million subscribers at that time.
China has the world's biggest telephone market, but traditional fixed-line carriers have seen growth slow sharply as potential customers opt increasingly for mobile service.
Netcom and its bigger rival, China Telecom, are promoting Internet, Web-based television and other new services in hopes of reviving revenue growth.