China Telecom Corp Ltd, the smallest of the country's three telecommunications carriers, is still in talks with Apple Inc to carry its iPhone, targeting growth in high-end users.

China Telecom, which competes with China Mobile Ltd and China Unicom, would only increase handset subsidies if it started selling iPhones to draw more users to use its network, Chairman Wang Xiaochu said.

We have a confidential agreement with Apple and can't tell you anything as of now, Wang told a news conference after the company announced its first-half results.

China Unicom is the only carrier selling the popular iPhone in China, the world's largest mobile phone market, although the two other operators have been aggressively negotiating with Apple to be next.

China Telecom, which has increased capital expenditure to 50 billion yuan this year from 43 billion yuan last year, sees its overall ARPU (average rate per user) trending lower in the second half of this year.

For voice, we will track our competitors on pricing, but we'll try to maintain our pricing for data. That's because our 3G development is better, so larger data traffic will help raise our ARPU, Wang said.

Its views are largely in line with China Mobile, which said last week that its ARPU would continue to fall for the rest of the year.

China Telecom executives said during the news conference that 3G ARPU for 3G services was slightly above 80 yuan in the first half after introducing the service in the second half of last year.

Earlier on Tuesday, China Telecom said first-half net profit rose 8.1 percent year on year to 9.8 billion yuan, which helped boost its shares by 4.8 percent by the close.

(Editing by Chris Lewis)