CHINA'S Yangtze Power Co Ltd is considering buying a major stake in Datang Mobile Communications Equipment Co. (stock code: 600198).The aim is to boost profits through diversified investment in the telecommunications sector.

Yangtze Power (stock code: 600900), the operator of the world's largest hydropower project, said it began discussions with Datang's parent company, Datang Telecom Technology & Industry Group, several months ago to acquire a stake in the unit.

The power company confirmed its intentions in a statement filed to the Shanghai Stock Exchange yesterday.

Datang Mobile is the major developer of China's third-generation high-speed cellular phone networks standard, or TD-SCDMA (time division-synchronous code division multiple access) technology.

Yangtze's share price climbed 0.13 percent to close at 15.38 yuan (US$2) yesterday.

"Yangtze Power has been looking to long-term investment in promising industries to drive profit," said Cui Yuqin, analyst from Everbright Securities Co Ltd.

"Datang's business will be quite profitable with strong government support in developing the 3G technology and that fits nicely with Yangtze's aggressive expansion target."

China plans to offer 3G services in time for the Beijing Olympics, starting in August, 2008. Phone carriers may spend up to US$20 billion on 3G networks in the world's largest cellular phone market, according to Bloomberg News, citing industry experts.

Yangtze Power said in yesterday's statement that no deal has been finalized after media reports claimed it has agreed to spend 1.3 billion yuan for a 12 percent stake in Datang Mobile.

"Yangtze Power will make a solid investment at an appropriate time to make better use of funds and boost returns to shareholders," the Beijing-based company said in the statement, adding that hydropower generation remains its main business.

Net profit for Yangtze Power rose 8.5 percent to 3.6 billion yuan last year.