Cheap mobiles have boosted China Telecom's profits

The country's largest fixed-line telephone company also saw growth in the sale of its broadband service.

It reported net profits of 25bn yuan ($3bn) for last year, compared with a restated 10bn yuan in 2002.

China Telecom also announced plans to issue shares worth roughly $3bn to fund the planned acquisition of 10 provincial phone networks.

Provincial networks

As about 9% of the shares are owned by its state-owned parent firm, their sale will effectively lower the government's stake in the company.

The company intends to issue the new shares before 2 November.

Nam Park, telecoms analyst at HSBC in Hong Kong, said China Telecom's great strength was the sheer size of its market.

"There is a huge element of scale here," he told the BBC's World Business Report.

"Despite the fact that some of the tariffs in China are among the lowest of in the world, there are simply a huge number of subscribers out there."

China Telecom acquired six provincial networks from its parent company in 2003, and as a result was forced to restate its 2002 results to include them, which lowered profits.

China's three telephone companies have made many such purchases.

They have bought their parents' most profitable networks first, then the remaining assets over time, often at knock-down prices.