The fixed-line giant expects earnings to top 10pc next year following the acquisition of six networks from its parent Mainland fixed-line giant China Telecom Corp hopes to achieve 10 per cent consolidated earnings growth next year following the 80 billion yuan (HK$74.16 billion) acquisition of six networks from its parent. Speaking at a meeting to reveal the details of the long-expected acquisitions from controlling shareholder China Telecommunications Corp, China Telecom chairman and chief executive Zhou Deqiang said the carrier was expecting the combination of 10 networks to yield 8 per cent growth in revenue and 10 per cent growth in net profit for next year. Excluding the acquisitions, China Telecom's four provincial networks are expected to yield 5.59 per cent net profit growth next year, according to a consensus estimate of 20 brokers. The publicly traded arm of the mainland's fixed-line giant announced yesterday it would pay 46 billion yuan in cash for the six networks. The H-share firm would also take up 34 billion yuan in debt at the target assets, bringing the purchase value to 80 billion yuan. It will pay an initial 11 billion yuan in cash to the parent. The remaining 35 billion yuan of the cash portion can be paid after 10 years at an annual interest rate of 5.184 per cent. After the acquisition, China Telecom would see its debt-equity ratio increase to 37.2 per cent from 12.7 per cent. Mr Zhou said the carrier would maintain its dividend payment for next year at 6.5 cents and had no plan to raise it. Assuming the six acquisitions had been completed at the beginning of the year, China Telecom would have added 45.07 million subscribers, or 107.27 million users at the end of June. China Telecom forecasts that the networks - in the provinces of Anhui, Fujian, Jiangxi, Guangxi and Sichuan and Chongqing municipality - will generate 6.35 billion yuan net profit for the full year, equivalent to 7.2 times price-earnings on the acquisition price. The deal would enhance China Telecom's interim earnings by 30.2 per cent and 21.1 per cent for the full year, the carrier said in its announcement. But the company said the networks were expected to be in negative free cash flow this year. Analysts believed the deal would enhance China Telecom's earnings but voiced concerns over liberal accounting treatments on the acquisitions that avoid hefty goodwill charges, the increased cash burden of heavy capital expenditure needs and the cash-flow pressure that the purchase would add to the company. Unlike previous acquisitions by China Mobile (Hong Kong) and China Unicom, China Telecom said the deal would not generate any goodwill that needed to be amortised against its profit-and-loss account over a period of time. 'We're using international financial standards, not Hong Kong accounting standards. This is a merger, not an acquisition,' China Telecom chief financial officer Wu Andi said. 'This is simply an issue of different accounting treatment.' CLSA Asia-Pacific analyst Charle Peza said the earnings enhancement would be less impressive if China Telecom was to amortise an estimated 15 billion yuan goodwill arising from the acquisition. 'This better-than-expected uplift [in earnings] is achieved in part by use of pooling of interest accounting instead of the purchase method - which means China Telecom avoids booking goodwill amortisation expenses of 750 million yuan per year [over 20 years],' Mr Peza said. He said if China Telecom adopted a 'more normal' purchase method, such as that used by China Mobile and Unicom, earnings-per-share accretion would only be 16 per cent.