(Yicai) March 12 -- Shares of QuantumCTek surged by over 10 percent after the unprofitable quantum communication firm said a unit of wireless carrier China Telecom will pay CNY1.9 billion (USD264.7 million) to become its largest shareholder.

QuantumCTek's stock price [SHA: 688027] hit the Star Market's upper limit of 20 percent in the morning session and closed 8.2 percent up at CNY132 (USD18.40). Trading of the stock was suspended from March 6 due to the anticipated acquisition.

The developer of quantum-secure products will issue 24.1 million shares to China Telecom Quantum Information Technology Group for CNY78.94 (USD11) apiece, the Hefei-based firm announced yesterday. China Telecom is one of the nation's three big mobile network operators.

The private placement will make up 23.1 percent of QuantumCTek's shares outstanding after the issuance so China Telecom Quantum will replace USTC Holdings as the largest shareholder. USTC is an investment platform under Hefei's University of Science and Technology of China and it currently holds a 13.4 percent stake in QuantumCTek and 21.7 percent of the voting rights.

After the move, QuantumCTek will make use of China Telecom's huge network system and client resources to drive quicker application and promotion of quantum communication products, the company said. The proceeds from the issuance will be used to supplement liquidity to ensure future research and development inputs, it added.

The purchase should improve China Telecom's standing in the field of quantum computing which uses quantum physics to solve problems that are too complex for normal computers. The wireless carrier set up China Telecom Quantum with CNY3 billion of registered capital in Hefei last May to develop such business, per the statement. No financial data is available for the unit yet as it is less than one year old.

China Telecom Quantum also penned an agreement with USTC and QuantumCTek's former chairperson Peng Chengzhi to acquire 41.4 percent of the target company's voting rights. Thereby, the State-owned Assets Supervision and Administration Commission of the State Council, a manager of state assets, will become the actual controller of QuantumCTek. Peng, an expert in quantum communication, was QuantumCTek's chairman for five years till last July and owns 2.1 percent of the firm's equity.

QuantumCTek has been in the red for three years in a row as the development of next-generation communication requires heavy investment. Last year, the firm's net loss expanded by 45 percent to CNY125.3 million (USD17.5 million) from the year before while revenue increased by 16 percent to CNY156.1 million, according to financial data disclosed last month.

Editor: Emmi Laine