The state-owned parent of China Telecom, the country's largest fixed-line operator, plans to spend Rmb80bn ($11.7bn) over the next three years to upgrade a newly acquired wireless network as it seeks to compete better against China Mobile, the market leader.

China Telecom also said it would more than double the number of mobile users from 43.2m in June to 100m by 2010 to obtain 15 per cent of the market, as it benefits from a trend of convergence between fixed-line, mobile and broadband services.

"We are facing a lot of challenges and pressures [in launching mobile service]. [But] we will take advantage of the synergies between fixed-line and mobile services," said Wang Xiaochu, chairman and chief executive.

As part of a stateorchestrated reorganisation to create three operators which have both wireless and fixed-line services, China Telecom in June agreed to pay Rmb110bn to buy a CDMA wireless business from China Unicom, the country's second largest mobile operator.

China Unicom will continue to operate a more profitable and bigger mobile network - the GSM one - and has acquired fixed-line operator China Netcom.

While China Telecom's parent group would acquire the CDMA network, its Hong Kong-listed arm would lease it for 28 per cent of the business's revenue a year until 2010. China Telecom said yesterday it aimed to launch its mobile business commercially by next February and turn the operation profitable by 2010. The operation had a pre-tax profit of Rmb1.2bn in 2007.

The CDMA operation acquired by China Telecom is by far the smallest mobile business in China. In terms of number of users, it controls just 7.4 per cent of the market, compared with 21.8 per cent of China Unicom's GSM operation and China Mobile's 70.8 per cent.

Although CDMA's monthly charges are mostly cheaper than GSM's, customers are often not inclined to sign up for the service because of poorer network quality and fewer handset models to choose from.

"100m is a very aggressive target," said Sandy Shen, a research director at Gartner in Shanghai. "CDMA has been losing market share since 2005. To be able to achieve that, [China Telecom] will not only have to reverse the trend, but double its market share."

China Telecom said it aimed to gain more mid-to-high-end customers, and would focus resources in urban areas to lift network capacity andquality.

Source:ft.com