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Unicom sells off CDMA arm

China Unicom Ltd, the country's second largest mobile carrier, yesterday signed an agreement with fixed-line operator China Telecom Corp to sell one of its mobile businesses for 110 billion yuan.

China Unicom said in an announcement that it expects a pre-tax gain of 37.56 billion yuan from selling its CDMA network and would use the proceeds to expand its remaining GSM business.

"Selling the CDMA business will have a positive impact on our business in the future since it will make us focus on developing the GSM business and better prepare for the upcoming 3G market," said Chang Xiaobing, chairman and chief executive of China Unicom.

He said the company will accelerate the pace of developing the GSM business, in which China Unicom had 128 million users by the end of last month.

The scale of the deal between China Unicom and China Telecom was announced on June 2, when China Telecom said it would buy subscribers of China Unicom's mobile telephone network equipment (CDMA) for 43.8 billion yuan and pay 66.2 billion yuan for the network.

The announcement was part of China's long-awaited plan to restructure its telecom industry, in which six operators will be merged into three full-service carriers.

China Telecommunications Corp, the Hong Kong-listed unit of China Telecom Corp, said yesterday in a separate announcement that it will pay its Beijing-based parent as much as 28 percent of annual revenue from the CDMA business as network-leasing fees until 2010.

The company also said it plans to invest up to 80 billion yuan to expand and upgrade the newly acquired mobile network over the next three years, according to a report from Reuters, citing Shang Bing, president of China Telecom's Hong Kong-listed arm.

Wang Xiaochu, president and CEO of China Telecom, has said in an interview that the company will start its mobile business by the end of February next year.

He said the company hopes to increase the subscriber base of CDMA from the current 43.17 million to 100 million in the next three years, aiming to take up 15 percent of the country's wireless market.

The government announced its plan to overhaul the telecom industry in May, in the hope of creating a more competitive telecom industry. The government later promised to issue licenses for 3G (third generation) mobile telephony as soon as the restructuring was completed.

According to government figures, China has the world's most cell phone users, with the number of subscribers surpassing 600 million by the end of last month.

But the country's telecom market has long suffered from a lack of competition under the de facto monopoly of China Mobile, the country's largest cell phone operator that has been raking in huge revenue in recent years and taking business away from fixed-line carriers China Telecom and China Netcom as users go mobile.

China Mobile's only rival, China Unicom, has not been a serious challenger as it struggled to operate two competing networks.

Nearly a third of China Unicom's employees will also be transferred to China Telecom as part of the deal, according to the company.