China Telecom aims to sell BlackBerry handsets and Palm smartphones in China by early next year, as it tries to gain share from its two larger mobile telecom rivals, a source familiar with the situation said on Monday.

China Telecom, the smallest of China's three major mobile operators, is fighting to compete in the country's increasingly cutthroat mobile market, the world's largest by subscribers with some 700 million users.

Its roll-out of Research in Motion's popular BlackBerry, optimised for receiving and sending e-mails, could be a boost for China Telecom, which does not yet have any high profile smartphone tie-ups with overseas handset makers.

China Telecom hopes to have released BlackBerry handsets by the end of the year or early next year, said the source, adding that the firm is also in talks with Palm to release Palm smartphones in the same time period.

China Telecom declined comment. The company said in June it had approached Research in Motion about possibly offering its BlackBerry service in China.

Rival China Unicom launched Apple's iPhone in China last month. China Mobile, the world's largest mobile carrier and China's dominant player, has shown interest in selling the iPhone and has said it is still in talks with Apple.

China Mobile will also be releasing Dell's first smartphone, the Mini 3, in China sometime in late November.

(Reporting by Joanne Chui; Writing by Melanie Lee; Editing by Jonathan Hopfner and Anshuman Daga)