China Telecom agrees to buy CDMA network assets from parent

22 Aug 2012

Fixed and mobile communications giant China Telecom Corporation Limited announced that on 22 August 2012 it entered into an agreement with its parent company, China Telecommunications Corporation (or China Telecom Group), to purchase certain CDMA network assets owned by the parent which it currently leases, including 2G/3G CDMA infrastructure covering 30 provinces, municipalities and autonomous regions in the People’s Republic of China (not including Xizang Autonomous Region). The preliminary price for the acquisition is CNY84.595 billion (USD13.346 billion), and the final adjusted price will be within CNY3 billion of this figure. The transaction is expected to be completed by 31 December 2012, subject to certain conditions being fulfilled, including regulatory and shareholder approvals. China Telecom will continue to lease certain CDMA network facilities from the parent company which are not included in the acquisition agreement.

China Telecom’s CDMA asset ownership reorganisation has a number of business aims, including: saving costs related to the rapidly rising CDMA network lease fees (currently calculated as 28% of audited CDMA service revenue), therefore improving EBITDA and enhancing company and shareholders’ value; removing the risk of potential increase in mobile network capacity lease fee rate upon renewal of the telecom CDMA lease at the end of this year; gaining direct control over future CDMA network investment decisions; and better integrating the mobile network and service offerings to improve operating efficiency.

TeleGeography’s GlobalComms Database notes that the wholly state-owned China Telecom Group (China Telecommunications Corporation) owns 70.89% of China Telecom Corporation Limited, with the next largest shareholders being Guangdong Rising Assets Management Co (6.94%) and Zhejiang Financial Development Company (2.64%); no other shareholder owns more than 2%.

China, China Telecom Corporation, China Telecom Group