China Telecom to acquire CDMA network for $13.3 billion

China Telecom to acquire CDMA network for $13.3 billion

China Telecom has agreed to buy the CDMA network it leases from its parent company China Telecom Corp. for an initial consideration of $13.3 billion and expects to close the deal by the end of the year.

The acquisition is expected to reduce the carrier’s costs over time as mobile subscriber numbers increase, and will give it direct control over future network investment decisions.

Analysts believe that the acquisition will enable China Telecom to attract high-end smartphone users, having earlier this year signed a deal with Apple to sell iPhones.

Company chairman, Wang Xiaochu, said that the trend of migration in China’s mobile market from 2G to 3G services would make approximately 900 million 2G users nationwide potential 3G customers of China Telecom.

He also highlighted the challenges the company is facing brought on by intensifying market competition and cannibalisation of traditional services by advanced technologies.

The acquisition announcement coincided with the release of China Telecom’s first half financial results in which it reported revenues up 14.9% from a year ago to CNY 138 billion.

Service revenue was up 11.3% to CNY 126.6 billion and EBITDA rose 0.5% to CNY 48.8 billion, with a margin of 38.5%. Net profit was down 7.4% to CNY 8.8 billion.

The carrier’s wireline broadband business generated CNY 33.4 billion in the first half of 2012, up 12.1% over the same period last year, and broadband subscribers reached 84.86 million, an increase of 8.05 million since January.

China Telecom had 144.1 million mobile subscribers in June, with 50.96 million 3G subscribers and a subscriber market share estimated at 13.8% in the first half of 2012.

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