In response to Chinese media reports about China Telecom's (CHA) intention to acquire MediaTek, both of the sides say the news is not true.

Previous reports and rumors among industry insiders stated that China Telecom had acquired stakes in MediaTek through companies in the second-tier market and the company would announce the total acquisition after it gained full holdings of the shares. The reports within various Chinese-language media on the mainland also said the news had been confirmed by several China Telecom insiders. However, now after the release of these reports, China Telecom said it had made internal consultations and coordination, and said that the news came out of nowhere.

MediaTek also issued feedback from its Taiwan headquarters saying the news is impossible and MediaTek has never contacted with China Telecom about a merger or buyout.

Fu Liang, a Chinese telecommunications expert, has been quoted by various Chinese media saying China Telecom just acquired the CDMA business from China Unicom and its financial capability does not allow it to acquire MediaTek with cash. Moreover, according to the development plan of China Telecom, the company will invest most of its funds in improving the quality of its CDMA network before the end of 2009.

At the same time, the industry insider says it is rare for a telecommunications operator to control the entire industry chain — though that is pretty much what China Unicom and China Telecom have attempted to do in recent years. In addition, MediaTek invested little in CDMA and CDMA2000, the businesses currently run and will be run by China Telecom, so the possibility of the acquisition is very small.

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