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March 22, 2011, 4:54 AM EDT
By Bloomberg News
(Updates with comment from analyst in fourth paragraph.)
March 22 (Bloomberg) -- China Telecom Corp., the country’s biggest fixed-line carrier, said it plans to buy the mobile- phone network it now leases from its parent company after the number of users more than tripled in the past year.
China Telecom will complete the purchase of the third- generation CDMA mobile phone network by the end of next year, Chairman Wang Xiaochu said at a press conference in Hong Kong today. He said the network is valued at about 90 billion yuan ($14 billion) and that the purchase will be funded with debt. He said a price for the acquisition hasn’t been decided.
China Telecom boosted the number of 3G phone users to 12.3 million at the end of last year, from 4.1 million a year earlier, by increasing the variety of handsets on offer. The network purchase will raise earnings, Wang said. The listed- company’s CDMA network capacity lease fee rose 59 percent to 13.3 billion yuan last year, the company said today.
“The reason why they are buying the network is because the leasing fee they are currently paying to the parent company is more than the depreciation of the assets and related finance charges,” Kelvin Ho, a Shanghai-based analyst at Yuanta Securities Co., said in a phone interview today. “If they buy, it will be cheaper and they will save costs. The parent will try to price it attractively so it will be accretive.”
China Telecom rose 2.3 percent to HK$4.49 at the 4 p.m. close of trading in Hong Kong.
The company said today profit excluding gains from connection fees rose 42 percent to 2.67 billion yuan in the three months ended Dec. 31. Sales rose 5.1 percent to 56.2 billion yuan.
--Mark Lee and Ed Lococo. Editors: Chua Kong Ho, Vipin V. Nair
To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net; Edmond Lococo in Beijing at elococo@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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(Updates with comment from analyst in fourth paragraph.)
March 22 (Bloomberg) -- China Telecom Corp., the country’s biggest fixed-line carrier, said it plans to buy the mobile- phone network it now leases from its parent company after the number of users more than tripled in the past year.
China Telecom will complete the purchase of the third- generation CDMA mobile phone network by the end of next year, Chairman Wang Xiaochu said at a press conference in Hong Kong today. He said the network is valued at about 90 billion yuan ($14 billion) and that the purchase will be funded with debt. He said a price for the acquisition hasn’t been decided.
China Telecom boosted the number of 3G phone users to 12.3 million at the end of last year, from 4.1 million a year earlier, by increasing the variety of handsets on offer. The network purchase will raise earnings, Wang said. The listed- company’s CDMA network capacity lease fee rose 59 percent to 13.3 billion yuan last year, the company said today.
“The reason why they are buying the network is because the leasing fee they are currently paying to the parent company is more than the depreciation of the assets and related finance charges,” Kelvin Ho, a Shanghai-based analyst at Yuanta Securities Co., said in a phone interview today. “If they buy, it will be cheaper and they will save costs. The parent will try to price it attractively so it will be accretive.”
China Telecom rose 2.3 percent to HK$4.49 at the 4 p.m. close of trading in Hong Kong.
The company said today profit excluding gains from connection fees rose 42 percent to 2.67 billion yuan in the three months ended Dec. 31. Sales rose 5.1 percent to 56.2 billion yuan.
--Mark Lee and Ed Lococo. Editors: Chua Kong Ho, Vipin V. Nair
To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net; Edmond Lococo in Beijing at elococo@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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