Hong Kong-listed China Telecom Corp Ltd has agreed to buy telecom-related assets from its State-owned parent in a move to increase its stock appeal as it copes with a slowing fixed-line business and a failure to obtain licenses to offer mobile phone services.

 

The firm said in a statement it would pay 1.41 billion yuan in cash for a 100 percent stake in China Telecom (Hong Kong) International Ltd, China Telecom System Integration Co Ltd, and China Telecom (USA) Corp, all of which are fully owned subsidiaries of China Telecommunications Corp.

 

"The acquisition is mainly designed to increase the stock appeal, especially before the government hands out the licenses for the 3G (third generation) mobile phones services," said Wang Guoping, an analyst with China Galaxy Securities.

 

China Telecom's voice call revenue fell for the first time last year, underlining a trend of voice-going-mobile that is weighing on the company's growth.

 

China Telecom has been lobbying the government for a license to offer mobile phone services to offset the slowdown of its fixed-line business.

 

Company Chairman Wang Xiaochu has repeatedly proposed buying one of the mobile phone networks run by China Unicom.

 

But 3G licensing, as well as industry consolidation, has been continually delayed, undermining China Telecom's appeal to investors.

 

In May, Commonwealth Bank of Australia and JP Morgan Chase & Co reduced their shareholdings at China Telecom Corp Ltd, according to Hong Kong stock exchange data.

 

The two companies are the No 2 and No 3 shareholders of China Telecom Corp Ltd. China Telecommunications Corp is the largest, with a 70.89 percent stake.

 

The acquisition of the parent's assets would help China Telecom Corp Ltd expand its service offerings and extend its business overseas, which could be appealing to investors, Wang Guoping said.

 

China Communications Services Corp, the engineering unit of China Telecommunications Corp, also said it will buy 4.63 billion yuan of telecommunications assets from its parent. China Communications Services Corp is also listed in Hong Kong.

 

China Galaxy's Wang said China Telecom could benefit from a looming domestic industry reshuffle. "I think now the possibility (of the consolidation) is increasing," he said.

 

(China Daily June 19, 2007)