Following May Day sales at the start of the month, a number of employees at China Telecom (NYSE: CHA; 0728.HK) and domestic handset manufacturers including Huawei and Yulong (Coolpad) say that there is another shortage of RMB 1,000 smartphone handsets which the operator has taken urgent measures with manufacturers to address. RMB 1,000 smartphones are a key area driving handset sales for telecom operators at the moment, and account for the majority of smartphones sold by China Telecom.

In late April and early May, China Telecom partnered with five of China's leading handset makers to release five sub-RMB 1,000 smartphones featuring 4" displays and 1 GHz processors, all selling for RMB 990. The handsets in question were the Huawei C8812, ZTE (0763.HK; 000063.SZ) N880E, Coolpad 5860+, Lenovo (0992.HK) A790e, and Hisense (600060.SH) E920 - all new handsets launched in April, with the exception of Lenovo's A790e, which went on sale in March. The new handsets all featured considerably more impressive hardware specifications than previous RMB 1,000 smartphones, at prices lower than RMB 1,000 - leading to extremely robust sales from late April onwards. Sources at Huawei and Coolpad say that China Telecom's contract handset sales outperformed sales from retail and distribution channels, leading to shortages in many areas.

It is not the first time China Telecom has run into shortages in its RMB 1,000 smartphone initiative. Last October, Ma Daojie, the director of the operator's handset management center, reported that the operator had to "beg" Huawei, ZTE, Coolpad, Lenovo, and other manufacturers to step up production of handsets.