China Telecom to Acquire CDMA Network Assets from Parent
Hong Kong Exchanges and Clearing, 8/22/12
China Telecom (NYSE: CHA; 0728.HK) and state-owned parent company China Telecommunications Corporation have entered into an Acquisition Agreement pursuant to which China Telecom has agreed to purchase certain assets and associated liabilities relating to the CDMA Network held by China Telecommunications Corporation through its network branches located in 30 provinces, municipalities, and autonomous regions in the PRC (not including Tibet).
The assets covered under the agreement include but are not limited to the Properties and other auxiliary facilities, general facilities, line equipment, wired transmission equipment, wireless transmission equipment, switching equipment, digital communication equipment, corporate information system equipment, emergency communication equipment, mobile communication equipment and power supply equipment, software copyrights and patented technologies, together with contracts, agreements and operating records, documents and files related to these assets, except any assets in the Retained Assets and Liabilities. The associated liabilities, include liabilities of China Telecommunications Corporation assumed by the Network Branches to be transferred in association with the transfer of the Assets, and relevant contracts, agreements, records, documents and files related to these liabilities, except any liabilities in the Retained Assets and Liabilities.
The initial consideration for the Acquisition is RMB 84.60 bln and is subject to price adjustment in accordance with the mechanism described in the Acquisition Agreement. Final consideration will be payable in cash by China Telecom to China Telecommunications Corporation after all the conditions precedent for completion as set out in the Acquisition Agreement have been fulfilled or otherwise waived by both parties.
At present, pursuant to the Telecom CDMA Lease, China Telecommunications Corporation has agreed to lease the Capacity on the CDMA Network to China Telecom and China Telecom has the exclusive right to use and operate the CDMA Network to provide the CDMA Service in the Listed Service Areas during the term of the Telecom CDMA Lease. The lease fee for the Capacity under the CDMA Network is currently 28% of the audited CDMA Service Revenue. To facilitate the arrangement under the Telecom CDMA Lease, China Telecommunications Corporation has set up certain network branches in the Listed Services Areas to procure and construct the CDMA Network and hold the relevant CDMA Network assets, including the Acquisition Target. China Telecommunications Corporation has granted to China Telecom an option to purchase the CDMA Network (the "Purchase Option") under the Telecom CDMA Lease. The Purchase Option may be exercised, at the discretion of China Telecom, at any time during the term of the Telecom CDMA Lease or within one year after the expiry of the Telecom CDMA Lease. No premium has been paid or will be payable by China Telecom for the grant of the Purchase Option. The Telecom CDMA Lease will expire on December 31, 2012.
Keywords: China Telecom wireless China Telecommunications Corporation CDMA 0728.HK CHA
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