April 25 (Bloomberg) -- Google Inc. won the right to sell advertising on 400 Web sites owned by China Telecom Corp., helping it compete with Microsoft Corp. and dominant local rival Baidu.com Inc. in the world's second-biggest Internet market.

The operator of the world's most-used Internet search engine and China Telecom, the country's biggest Internet service provider, signed an agreement to share revenue from the online ads, Mountain View, California-based Google said today in an e- mailed statement, without elaborating on financial terms.

The accord, Google's third partnership with a Chinese telecommunications carrier in the past year, may help the company close the gap on Baidu. Online ad sales in the country may surge more than sevenfold to $3.1 billion in 2011 from $420 million in 2005, Credit Suisse Group estimates.

``This is a big win for Google because Microsoft and Baidu both wanted this agreement with China Telecom,'' Foo Xinghua, an Internet analyst at Beijing-based researcher Analysys International, said today by telephone. ``China Telecom likely picked Google because they have better technology for Web ads.''

Shares of China Telecom were unchanged today at HK$3.87 at the end of trading in Hong Kong. Google's shares fell 0.3 percent to $477.53 yesterday in Nasdaq Stock Market composite trading.

Microsoft and Baidu

The agreement gives Google access to China Telecom's legion of Web sites that provide Chinese consumers with local business directories for restaurants, dry cleaners, and other services in specific Chinese cities.

Baidu had a 58 percent share of the Chinese search market in the fourth quarter, more than triple Google's 17 percent and Yahoo! Inc.'s 13 percent, according to researcher Analysys.

Yahoo and EBay Inc. are Web site operators that have teamed up with Chinese companies after struggling to win market share in the country. In 2005, Yahoo forged a partnership with Alibaba.com Corp., China's biggest online retailer. EBay partnered with billionaire Li Ka-shing's Tom Online Inc. last year.

Microsoft, the world's biggest software maker, signed an agreement with China Telecom last year to provide search services for the Chinese company's 114 directory Web site. Microsoft also partnered with Baidu and Shanghai Alliance Investment Ltd.

China Telecom's agreement with Google won't affect its previous relationship with Microsoft, Jacky Yung, a Hong Kong- based spokesman for China Telecom, said today by telephone. He declined to comment on whether Microsoft and Baidu made competing bids to sell ads on the carrier's Web sites.

Online Partnerships

Richard Feng, a Beijing-based spokesman for Microsoft's Internet services unit in China, and Wei Fang, a spokesman for Beijing-based Baidu, declined to comment on whether their companies competed against Google for the China Telecom contract.

Google and China Mobile Ltd., the nation's biggest wireless carrier, began offering Web site searches on mobile phones in January. The company also signed an agreement with the parent of China Netcom the nation's second-biggest Internet service provider, in February to provide search services for the carrier's Cncmax.cn Web site.

Google also said today it's working with Intel Corp., the world's largest semiconductor maker, to make it easier for chip resellers and computer makers to buy online advertising.

Microsoft signed an agreement to develop and sell business software in China over the Internet with Alibaba.com, the Chinese company said today in an e-mailed statement. The software will be offered to small- and medium-sized companies on a subscription basis, it said.

Internet Users

China, the world's second-biggest Web market by users after the U.S., was home to 137 million Internet users at the end of 2006, according to the China Internet Network Information Center, a government-backed agency that licenses online domain names.

China Telecom added 2.2 million high-speed, or broadband, Internet subscribers in the first quarter for a total of 30.5 million users. The carrier doesn't have figures for how many total Internet users, including those with dial-up connections, it has, spokesman Yung said.

Smaller rival China Netcom Group Corp. (Hong Kong) Ltd. added 1.52 million broadband users in the first quarter for a total of 15.9 million subscribers.

To contact the reporter on this story: John Liu in Shanghai at jliu42@bloomberg.net

Last Updated: April 25, 2007 07:06 EDT