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August 23, 2012

China Telecom to buy parent company’s 3G assets for $13bn

The acquisition is anticipated to be completed in December 2012

By CBR Staff Writer

China Telecom has agreed to acquire 3G network infrastructure from its parent company, China Telecommunications for $13.3bn.

The purchase is expected to save China Telecom’s rising lease fee to improve EBITDA, shareholders’ value and remove the risk of potential increase in mobile network capacity lease fee rate upon renewal of the Telecom CDMA Lease.

China Telecom will gain direct control over future CDMA network investment decisions and better integrate the mobile network and service offerings to improve operating efficiency of mobile service.

The acquisition, which is anticipated to be completed in December 2012, will also improve transparency of the mobile service operation and development as well as reduce the transaction amount of continuing connected transactions in future.

Earlier in 2012, China Telecom signed an agreement with Apple to carry iPhones as part of its efforts to draw more higher-end 3G users into its network.

China Telecom’s 3G users rose 40% from the end of 2011, while China Mobile reported growth of 31% and China Unicom 34%.

For the first half of 2012 China Telecom’s revenue rose 14.8% to RMB138.02bn ($21.8bn), compared to RMB120.22bn ($18.9bn).

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The company’s net profit fell 8.3% to RMB8.81bn ($1.39bn), from RMB9.62bn ($1.51bn) a year earlier.

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