China Telecom (CHA), the largest Chinese fixed-line operator, has revealed plans to augment its wireless handset portfolio. The company is currently in talks with overseas handset vendors and targets to offer Research in Motion’s (RIMM) popular BlackBerry handset and Palm’s (PALM) smartphones in China in late 2009 or early 2010. This move represents a part of China Telecom’s efforts to boost its share in the domestic wireless space.

China Telecom is the market leader in fixed-line phone services in one of the world’s fastest growing telecom markets. Being one of the incumbent telecom operators in China, the company is well positioned to benefit from the country’s rapid economic growth coupled with aggressive wireless expansion.

With roughly 700 million subscribers, China is the largest wireless market in the world. China Telecom added mobile operation to its service offering in October 2008 through its acquisition of China Unicom’s (CHU) CDMA wireless business for approximately RMB43.8 billion (US$6.4 billion). However, China Telecom’s wireless CDMA operation accounts for only 7.5% of mobile phone users in China, well behind in terms of market penetration in this segment. The company is currently the smallest of the big three wireless carriers in China.

To boost wireless market share, China Telecom’s rivals China Mobile (CHL) and China Unicom are increasingly focused on broadening their mobile handset offerings. Leveraging its new 3G services, China Unicom recently launched Apple’s (AAPL) iPhone in mainland China.

While China Mobile is still considering selling the iPhone, it is currently rolling out android-based handsets (“Ophones”) and will launch Dell’s (DELL) first smartphone in the near future. In contrast, China Telecom is yet to clinch any high-end handset contract from a major overseas vendor. Under this scenario, an opportunity to market two of the world’s most sought after cellular handset brands may lift China Telecom’s fortune in wireless.

China Telecom hopes to increase its total mobile subscriber base to over 100 million by 2011, representing over 15% of the total Chinese wireless market. Additionally, the company plans to sign up 35 million new 3G users in 2009 and address 97% of the urban population by the end of the year. China Telecom’s expanding handset range supported by the upcoming premium smartphone offerings will help it to reach this goal.

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