China Telecom builds its broadband team

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China Telecom, the country's struggling No. 1 fixed-line telecom operator, will pay 5.6 billion yuan ($793 million) for Beijing Telecom, a move analysts said could boost its ability to tap the growing broadband IPTV market around August's Olympics.

Executives said the purchase by the Hong Kong-listed telecom will enhance its competitiveness and help it benefit from increased demand during the Beijing Games starting Aug. 8.

"Beijing's IPTV market is potentially huge and expects strong growth around the Olympics," Ovum telecom analyst Charice Wang said. "Therefore, the expected continuing good performance of Beijing Telecom possibly helps to improve China Telecom's performance indicators in 2008."

China Telecom said late Monday that subscribers fell by 2.7 million to 220 million in 2007. It posted a 37% drop in its fourth-quarter profit as consumers increasingly turn to mobile phones. Full-year profit of 23.7 billion yuan was down from a slightly revised 27.2 billion yuan a year ago.

"Although the intensifying market competition is a serious challenge to us, the upcoming full-services offering will bring enormous business opportunities," China Telecom chairman Wang Xiaochu said.

The company generates about 36.5% of its revenue from data, Internet broadband and other nonvoice services, executives said.

With the Beijing Telecom purchase, China Telecom can hone its focus on the residents of China's capital, nearly half of whom are now online, according to the China Internet Network Information Center. Of those, 70% were using broadband as of February.

China, with 1 million subscribers, is seeing the fastest IPTV adoption in the Asia-Pacific region, London-based Informa Telecoms and Media, which owns Ovum, said in March.

Reuters contributed to this report.
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