China Telecom Corp Ltd plans to offer Apple Inc's popular iPhone in China by close to the end of 2011, sources said, making it the second operator to do so in the world's largest mobile phone market.
The move will help China Telecom, the smallest of the country's three telecom operators, cement more 3G users in a competitive market in which handset subsidies offered by carriers are squeezing margins.
China Telecom's shares extended earlier gains to rise as much as 3.4 percent to an intraday high of HK$4.85, outperforming the Hang Seng Index's 0.96 percent gain.
China, which has 896 million mobile phone users -- bigger than the entire population of Europe, has three telecommunications operators -- China Mobile Ltd, China Unicom and China Telecom.
So far, China Unicom is the only operator to sell iPhones after signing a three-year agreement with Apple in 2009, although it is not based on a revenue-sharing scheme, unlike some other operators in other countries.
The reason telecom operators are fighting for the iPhone business is because everybody is trying to grab as many 3G users as possible, said Jane Wang, an analyst at UK-based research firm Ovum. The only way to keep costs down is to build up such a user base.
In May, China Telecom Chairman Wang Xiaochu told a news conference that the carrier had contacted Apple to launch the iPhone based on CDMA (code division multiple access) technology.
It's expected to happen this year. China Telecom already has the required technology and it all hinges on the content of the agreement. As we all know, it's not easy to negotiate with Apple, a source close to the company, speaking on condition of anonymity, told Reuters on Wednesday.
China Telecom was expected to introduce the iPhone in November, said another source, who declined to be identified because he was not authorized to speak to the media.
China Telecom, which operates the country's largest fixed-line network and is a relative newcomer to China's mobile market, with 105.7 million mobile phone users as of May.
Deutsche Bank, in its latest report, maintained a buy rating for the stock with a target price of HK$5.70.
(Reporting by Hong Kong newsroom; Editing by Chris Lewis)