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China Telecom in Rmb5.6bn acquisition

01 апреля 2008

China Telecom on Monday said it was to acquire Beijing Telecom, an arm of its state-owned parent, as the country’s biggest fixed-line operator seeks sources of growth.

Hong Kong-listed China Telecom will pay Rmb5.56bn ($793m) for Beijing Telecom, which reported a 46.4 per cent increase in profits to Rmb470m last year.

The move will boost the bottom line at a time when business is threatened by the switch to mobiles.

China Telecom, which reported annual results on Monday, lost subscribers for the first time last year and has 220m phone users. Voice call revenue, which fell for the first time in 2006, was 7.9 per cent lower last year. Average revenue per phone user dropped 10.1 per cent.

Regulations forbid fixed-line operators, such as China Telecom and the smaller China Netcom, from operating mobile assets. They are allowed to have limited wireless services that piggyback local fixed-line networks. In a mature and saturated market, they are at a disadvantage to mobile operators.

There has been talk of an industry restructure, which would lift this restriction and boost competition for China Mobile, which dominates the wireless market.

The changes are expected as early as this year as China prepares to launch third-generation services.

Wang Xiaochu, chairman and chief executive of China Telecom, said the acquisition of Beijing Telecom was not related to restructuring. He hoped that owning the network would help China Telecom benefit from increased demand in Beijing because of this year’s Olympics.

Analysts said the purchase was likely to lift the company’s slow growth. China Telecom’s profits increased just 1.1 per cent last year to Rmb22.52bn while operating revenue rose 2.8 per cent to Rmb175.36bn. Earnings per share were Rmb0.278 in 2007, up from Rmb0.275 in 2006.

“It’s a very small deal but it will help China Telecom, which has next to no growth,” said Marvin Lo, analyst at Daiwa Institute of Research.

China Telecom hopes to expand non-voice business – such as broadband internet and value-added services on fixed-line phones – to offset the declining voice market.

Its non-voice revenue grew 28 per cent last year and accounts for about a third of revenues.
Mr Wang said he expected that proportion to increase to a half within two years.

Источник: Financial Times

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