(The share price rise is) proof indeed that the words 'China' and 'wireless' when combined cancel out the words 'rational' and 'analysis'

Nomura telecoms analysts

China Mobile said it was buying eight Chinese phone networks from its parent firm for $10.2bn.

Vodafone's cash will help to pay for the deal - which could give China Mobile a bigger subscriber base than Vodafone, currently the world's biggest mobile operator.

Sceptical view

China Mobile will streamline the eight networks by laying off about one third of their staff, keeping about 20,000 workers, China Mobile spokesman Jacky Yung said.

China boasts the world's second largest fixed-line phone market with 192 million people connected, and the largest market for mobile phones with 166.5 million subscribers.

China Mobile's shares were 4.8% higher at HK$27.10 in early trade on Friday.

But some telecoms analysts were sceptical about the value of the assets China Mobile has acquired.

The share price rise was "proof indeed that the words 'China' and 'wireless' when combined cancel out the words 'rational' and 'analysis'", according to telecoms analysts at Japanese bank Nomura in Hong Kong.

They think the shares are worth about HK$18.

Fixed line reform

News of Vodafone's decision to increase its investment came on the same day as two massive new Chinese phone companies were born from the break-up of the near-monopoly carrier, China Telecom.

"Reform is the direction and competition is the goal," said Wu Jichuan, head of China's Ministry of Information Industry.

The split of China Telecom paves the way for an expected flotation of the state-owned China Telecom in New York and Hong Kong, a listing that analysts value between $3bn and $5bn.

It is also designed to encourage increased foreign investment in China's burgeoning telecoms sector.

Hong Kong based financial analyst Joe Lock told the BBC's World Business Report he believed the plan was to float both companies.

"They would like to have them in public hands and have them privatised outside the government - I think that is really the primary goal here," he said.

Mobile ambitions

China Telecom retains its name and networks in 21 southern and western provinces, and has a market capital of 158bn yuan ($19bn).

It has handed over networks in 10 provinces and cities to the new firm called China Netcom Communication Group.

But many observers believe that genuine competition in the fixed-line sector is still years away for most customers.

Both firms are eventually expected to receive mobile phone licences, to compete with the two existing mobile carriers - China Mobile and China Unicom.

In a country of nearly 1.3bn people, where the fixed-line network is underdeveloped, mobile subscribers are likely to outnumber their landline counterparts by 2005.

Mobile phone penetration is at just 11.2% in China, compared to 60-80% in European countries.