China Telecom confirmed its plan to acquire the CDMA network it uses from its parent, for around CNY85 billion (US$13 billion). It said that this will strengthen its operational efficiency, as well as improving profitability in the future.

The news came as the company reported a reduced profit for the first half of 2012, with it noting that “an accelerated migration trend from 2G to 3G in China is becoming more noticeable”.

The operator said that it believes the network deal will benefit it through the reduction of lease fees, which will more than offset the cost of owning the network. It also said it will enable it to have more direct control over future investment, to further focus on network optimisation and capacity expansion to meet demand.

Under the current agreement, China Telecom pays 28 percent of its audited CDMA service revenue to use the network, a sum that is increasing as it adds 3G subscribers.

For the six months, China Telecom reported a profit attributable to shareholders of CNY8.8 billion, down from CNY9.6 billion, on operating revenue of CNY138 billion, up 14.8 percent from CNY120.2 billion.

It noted that it “believes the launch of the iPhone to expand the high-end market would require an appropriate increase in marketing initiatives which would create short-term pressure on profitability, however, it would enhance long-term sustainable growth and value creation for the company”.

Its mobile subscriber base reached 144 million, representing a net addition of 17.71 million in the last six months, of which 50.96 were 3G customers, up 14.67 million during the period.

The company is following a 3G smartphone-driven strategy, and strengthened its cooperation with vendors to deliver large-screen smartphones priced around CNY1,000.

Taking into account its cash flow and the capital needed to fund the CDMA network acquisition, the China Telecom board has opted not to pay an interim dividend. It said it will “proactively consider the final dividend proposal when reviewing the full year results”.