China Telecom will acquire Beijing Telecom from its parent group, China Telecom Corp, for 5.5 billion yuan.
Wang Xiaochu, chairman of Hong Kong-listed China Telecom, said the deal will boost its services to businesses in Beijing.
Beijing Telecom posted 470 million yuan in net profit and 2.4 billion yuan in revenue last year, up 19.5 percent and 46.4 percent from 2006. Eighty percent of its total customer base uses non-voice services.
Wang expects a telecommunications industry restructure will be announced soon.
"We believe the reform is imminent, because the central government is keen to see the mainland telecommunications sector working smoothly," Wang said, adding that China Telecom is yet to decide whether it will use its listed arm or the parent group in the restructure.
Wang said the company's low debt ratio gives it room to issue debts to bankroll the restructure, and expects it will take three to four months to complete asset transfers.
He also said that the company might consider issuing a small proportion of A shares and introducing strategic partners, "but we could press ahead with the A-share listing, even before the restructure kicks off".
China Telecom posted a 1.1 percent increase in underlying net profit to 22.2 billion yuan in 2007, but its net profit was down 13 percent to 23.7 billion yuan, after it incorporated a property revaluation, plant and equipment and upfront connection fees.
Wang attributed the setback to its voice business, which is sliding. Revenue for the segment fell 7.9 percent from 120 billion yuan in 2006 to 111 billion yuan in 2007, while its non-voice revenue jumped 28.8 percent to 64 billion yuan.
Internet access and value-added and integrated information service earnings climbed 32 percent and 35 percent to 32 billion yuan and 19 billion yuan.
"The two divisions will be our growth engines," Wang said. He said the proportion of non-voice business revenue will grow from 36.5 to 50 percent in 18 months.
The company's capital expenditure dropped 7.2 percent to 45.5 billion yuan in 2007.
(China Daily April 1, 2008)
