Telephone giant China Telecom's massive flotation looks set to start next month, and could raise as much as $4bn for the company.

The firm's application for a listing in the US with the Securities and Exchange Commission, filed on Tuesday, allots 159.6 million American Depositary Shares (ADSs) - each worth 10 shares in the company itself - to the US market.

Only 840 million shares, barely 5% of the total, are being assigned to the Hong Kong market on which a number of major Chinese "red chip" shares are already listed.

If investors take up all the shares - which is admittedly a risk, given the extreme volatility and pessimism surrounding global stock markets today - they will own a total of 20% of China Telecom.

The company has yet to disclose a price range for the IPO, although arithmetically a $3.4bn-4bn income suggests a price of about $0.20-0.25 a share or $2-2.50 per ADS.

Expansion

The flotation is the second major Chinese telecoms flotation to be announced in less than a month.

Earlier in September, mobile operator China Unicom kicked off mainland China's biggest ever shares sale, in the hope of raising about $1.4bn for network improvements.

China Telecom, too, is planning to use at least half its receipts to pay for network upgrades.

China's 1.4 billion-strong population is seen as ripe for telecoms expansion by both domestic and foreign phone companies, whereas many other large markets are either underdeveloped or saturated.

Competition

While Unicom is focusing on the mobile market, China Telecom is - thus far - a fixed line and data operator only.

The firm was only created in May when China's dominant fixed-line monopoly telephone firm, also called China Telecom, was split in two.

The new China Telecom was given a designated catchment area comprising 20 southern provinces, while rival China Netcom Group was allocated 10 northern provinces, including the capital Beijing.

The government is expected to award both companies mobile phone licences, allowing them to compete with China's established mobile operators China Mobile and China Unicom.