Feeds

China Telecom: provincial investment

Potential subscriber base of half a billion

  • alert
  • submit to reddit

High performance access to file storage

China Telecom Corp Ltd, the Hong Kong-listed arm of China Telecom, will expand its potential subscriber base to half a billion people, after announcing it would pay its state-owned parent CNY46 billion ($5.55 billion) to acquire six provincial fixed-line networks. The regions have high growth potential, although significant investment will be needed.

China Telecom has been in talks with its parent over the acquisition since July. Under the terms of the deal, it will pay an upfront cash payment of CNY11 billion ($1.32 billion). The remaining CNY35 billion ($4.22 billion) will be paid out over 10 years after the deal is completed. China Telecom will also assume CNY34 billion ($4.10 billion) in debt owned by the six networks. It will use the proceeds of last year's IPO to finance the deal.

The purchase price values the six networks at 7.2 times their forecast net profit, which is estimated this year to be in the CNY6.35 billion ($767 million) region. For the six-month period ending June, China Telecom reported a net profit of CNY9.26 billion ($1.11 billion). The company believes the acquisition will raise earnings by about 30% in the first half.

At the moment, China Telecom controls some of the richest areas in China, including Shanghai, and the provinces of Jiangsu, Zhejiang, and Guangdong. These areas currently have a penetration rate of 25.7%.

The six networks it plans to buy include the provinces of Anhui, Fujian, Jiangxi, Sichuan, and Guangxi, as well as the city of Chongqing. These networks are viewed as potentially high-growth areas, as the penetration rate lags at 13.4%, lower than the national average. However, these regions are also poor and require significant investment.

Following the acquisitions, China Telecom's footprint in mainland China is set to rise dramatically, to potentially 524 million people, or 40.8% of the total population in China. It currently has a 107 million-strong subscriber base.

However, China Telecom is facing increasing competition in its fixed-line and broadband business. Its rival, China Netcom, has been rolling out services in China Telecom's market, mainly in the richer cities of Shanghai and Guangzhou.

Related Research
Voice Business Worldwide
Asia-Pacific and Chinese Wealth Management 2003
Voice Business: Asia Pacific

High performance access to file storage

More from The Register

next story
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
prev story

Whitepapers

Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
SANS - Survey on application security programs
In this whitepaper learn about the state of application security programs and practices of 488 surveyed respondents, and discover how mature and effective these programs are.