China Telecom has unveiled details of its plan to pay its parent US$6.4 billion for three mobile-telephone networks in the mainland. The company said it would take up about US$269 million of debt carried by the three companies as of June 30. The price for the companies, in Fujian, Henan and Hainan provinces, is in line with market expectations. Analysts had expected China Telecom to pay US$6 billion to US$7 billion for the networks. To finance the acquisitions, China Telecom said it would issue US$3.95 billion of new shares to its parent - China Telecom (HK) Group, which is controlled by the Ministry of Information Industry - and would pay US$2.45 billion in cash. Of this amount, it plans to raise US$1.65 billion through a share placement and US$500 million through a bond issue. The balance of this cash portion is to be met from internal resources. After the acquisition, China Telecom's parent company's interest in the company will be reduced to 75 per cent from about 76.5 per cent. China Telecom will begin an international roadshow in mid-October to promote the share and bond offerings. Chairman Wang Xiaochu said the offerings would be priced by the end of the month. He said that the acquisitions would be completed by early next month. China Telecom originally planned to raise up to US$2 billion through a share placement and US$1 billion through a bond issue. Mr Wang said the company decided to hold a smaller bond issue as a preventive move to lower its risk from any devaluation of the mainland's currency. 'Even though there is only a 10,000-in-one chance for the yuan to be devalued, we have to be prepared,' he said. After the bond issue, foreign debt would account for about 20 per cent of China Telecom's total debt, Mr Wang said. Analysts said China Telecom was paying a fair price to its parent to acquire assets that would enhance its growth. By paying about US$1,900 per subscriber to acquire the networks, Daiwa Institute of Research said the price for the three networks was much lower than what it paid for a single network last year in Jiangsu province. In that transaction, the company paid about US$2,800 per subscriber. 'I think its a good price for the shareholders,' DBS Securities analyst Peter Milliken said. 'Compared with the valuation, China Telecom is paying 21 times its projected [price-earnings ratio for this year] to acquire the networks, while its share price is about 35 times the PE ratio,' he said. 'That's quite a good offer.' Mr Wang said the acquisition of the mobile-telephone networks would help the company to strengthen its overall market position and profit growth, as they covered major costal cities. At the end of June, the networks had a total of 3.41 million subscribers. With those subscribers, China Telecom's client base would swell to 12.13 million. China Telecom said the networks were expected to have a combined profit of 2.47 billion yuan (about HK$2.3 billion) for this year. The company said this additional profit would enhance its earnings per share by about 9 per cent on a half year pro forma basis. China Telecom's share price has outperformed the Hang Seng Index this year. Yesterday, the company's shares rose 3.6 per cent yesterday to finish at HK$24.80.