China Telecom Acquires CDMA Network, Employees from China Unicom

China Telecom has signed an agreement to acquire China Unicom’s CDMA network for 43.8 billion yuan, and will also take 29.3% of China Unicom's present employees, its entire CDMA staff.

As agreed in a June 2 joint announcement, the listed sector of China Telecom will acquire the CDMA business of the listed sector of China Unicom. The acquisition price was to be decided on the basis of the actual value of China Unicom’s CDMA network according to the half-year financial report. If it was under 98% of expected value, for each 1% it dropped below expected value the trading price would drop 1% from the proposed price.  As of the signing, the price remained at 43.8 billion yuan.

China Unicom announced that the number of its CDMA users increased in June by 16,000, much lower than the May increase of 55 thousand, but this did not affect the buying price. By June 30, China Unicom’s GSM users stood at 128 million, while CDMA users totaled 43.169 million.

The final signed contract will be submitted by the two sides to the related department for approval by September 30, and substantial delivery should be finished by November 30. Everything related to the acquisition should be completed by March 31, 2009.

According to the earlier agreement, China Telecom will also acquire China Unicom’s CDMA fixed assets for 66.2 billion yuan. This plan is to be voted on at the shareholder meeting held in the middle of September and finished by the end of the month.

Chang Xiaobing, chairman and CEO of China Unicom, said selling its CDMA business would improve the company’s long-term competitiveness. After the sale, it will invest its earnings from the CDMA deal in its GSM business to expand the coverage of its network, improving its IT support system and the platform for value-added service, so it will be able to further improve GSM service quality in preparation for the development of 3G business.

"Operation of all kinds of mobile services with the 3G business will become the major driving force for the company’s future development," said Chang Xiaobing.