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. Last Updated: 07/27/2016

Hong Kong-Listed Telecom Buys on Mainland

HONG KONG -- Plans by the Hong Kong-listed unit of China Telecom to buy three mainland telecommunications networks from its parent will expand the subsidiary's market share and boost its earnings, analysts said Tuesday.

China Telecom (HK) Ltd. officials announced the deal, worth $6.4 billion, with parent China Telecom late Monday.

They said the networks, located in Hainan, Fujian and Henan provinces, have a subscriber base of 3.41 million as of June 1999 and a market share in the three provinces of about 97 percent.

Joseph Locke, telecommunications analyst at ABN AMRO Asia Ltd. said the deal positions China Telecom (HK) to tap the industry's great growth potential. "It's a hot sector. It's going to be what people are consuming in large quantities," he said.

Investors scooped up China Telecom (HK) shares, sending its price up 80 Hong Kong cents (10 cents), or 3.2 percent, to 25.60 Hong Kong dollars ($3.30) in early afternoon trading.

The move offers little for foreign investors besides more shares, analysts said.

The deal "has no implications for foreign investors except passive shareholders," Locke said.

Buying shares in China Telecom (HK) is the only legal way for foreign investors to get a slice of China's restricted telecommunications market.

The company will issue $500 million in debt and offer $1.65 billion in shares to raise the money for the networks.

China Telecom (HK) will pay for the rest of the acquisition with cash and by placing $3.95 billion in shares with its controlling shareholder China Telecom (HK) BVI Ltd.