Telecom & Wireless

China Telecom Acquires Provincial Networks

China Telecom Corp Ltd has announced that it is purchasing provincial phone networks from its parent company China Telecom.

This follows a similar purchase last year when China Telecom Corp paid its parent $5.6bn in cash for six provincial networks, upping its coverage to 10 provinces and subscriber numbers to 100 million.

With the new purchases, China Telecom Corp will pay its state-owned parent $3.35bn for 10 more provincial networks. $1bn will be paid in cash upfront, while the remainder will be paid 10 years after the deal is completed. In addition to this, it will also assume $4.83bn of debt owed by the networks. The new networks are in the provinces of Hubei, Hunan, Hainan, Guizhou, Yunnan, Shaanxi, Gansu, Qinghai, Ningxia Hui Autonomous Region, and Xinjiang Uygur Autonomous Region. With the acquisition, the geographic coverage of the company's operations in China will expand to 20 provinces and its subscribers will exceed 160 million.

These 10 provincial networks are mainly in the poorer regions of China and have a total of 42.9 million subscribers, commanding 95.9% of the market share in the 10 provinces. The business includes fixed-line telephone, Internet and managed data, and leased line services. In 2003 they recorded sales of $3.99bn, but posted net losses of $1.30bn after they were hit with a $580m write-off.

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