China Telecom to lease CDMA network from parent

28 Jul 2008

China Telecom will pay more than USD8 billion to use its parent’s newly acquired wireless network for the next three years, as the country’s top fixed line carrier enters the mobile market hoping to more than double its subscriber numbers to 100 million by 2010. Under the agreement, China Telecom will lease the CDMA network from its state parent at a fee equal to 28% of CDMA revenues for each year from 2008 to 2010, up to a maximum RMB59 billion (USD8.64 billion). At the same time, China Telecom’s parent plans to invest RMB80 billion (USD11.7 billion) over three years expanding and upgrading its CDMA network, top executives told Reuters. In a complex three-way deal, China Telecom and its government-run parent agreed last month to split the cost of taking over Unicom’s CDMA arm. China Telecom aims to launch its mobile business by end-February, Chairman and CEO Wang Xiaochu said in an interview, debuting in a market currently shared by China Mobile and China Unicom.

The moves are part of Beijing’s plan to overhaul the telecoms industry, leaving China with three super carriers, each offering fixed line and wireless services in what has been dubbed the world’s largest industrial reorganisation. China Telecom will, in total, pay more than USD16 billion, with the listed firm paying RMB43.8 billion for the CDMA business, including existing customers, and its parent paying RMB66.2 billion for the actual network. China Telecom had planned to issue up to RMB80 billion (USD11.7 billion) in bonds to bankroll its acquisition.