China Mobile, Unicom seek A shares
Author: HOU MINGJUAN
The prospected listing of China Mobile and China Unicom on the mainland stock markets may bring both better-than-expected results, said telecoms experts.
China Mobile, the country's dominant mobile telecoms operator, controls nearly 80 per cent of the market and operates only GSM businesses.
The company is expected to continue to have a high growth rate in the coming years and is considered by major investment banks to be a well-run firm with excellent prospects.
"The shares of the two companies will become hot cakes in the domestic market as investors have been eager for a long time to buy profit-rich telecoms stocks," said Jim Lin, chief telecom analyst of Frost & Sullivan, a US-based research house.
The domestic listing will be a boost to the companies' businesses as stock buyers are more likely to adopt the companies' services which could significantly increase the user base, he said.
China Mobile and China Unicom are China's only two mobile telecoms operators listed on the stock markets of New York and Hong Kong.
After announcing their 2000 year-end results in Hong Kong recently, which reported over 200 per cent profit growth, both said they were considering issuing A shares on the domestic stock markets.
But they are still waiting for governmental approval and no timetable has yet been set.
Yang Xianzu, chairman of Unicom, said the company will set up a subsidiary and inject part of its overseas-listed stocks into the new firm then list it on the stock markets in Shanghai or Shenzhen.
The money collected from the domestic stock market will be used to fund the construction of the CDMA network, or code division multiple access, the country's first such network in mobile telecommunications.
The network, which will provide higher data delivering quality than the present GSM (global system for mobile) communications network, has attracted interest from both investors and customers.
Wu Jichuan, minister of the information industry, also said the government would support the companies' domestic listing.
The mobile telecoms sector has reported rapid growth in recent years and has become the major source of income for the country's information technology industry.
Because both telecoms firms are listed overseas, domestic investors have not been able to buy shares.
Market analysts expect the two firms' domestic listings will ignite a buying frenzy in telecoms shares.
However, some overseas investors fear that Unicom's domestic listing of CDMA-related businesses may hurt its overseas-listed GSM businesses as some customers prefer CDMA to GSM.
But others said the domestic listing will benefit Unicom as a whole and will not hurt the interests of the overseas-listed branch.
"Current fears that the deployment of CDMA services by Unicom will cannibalize China Unicom's already-listed GSM services are groundless," said Xinhua Liu, telecoms analyst of consulting firm Burson-Marsteller.
Unicom's new CDMA network uses the most updated technology that targets high-end users, most of whom are now subscribing to China Mobile's service, instead of low-end users who are mostly adopting Unicom's GSM service, said Liu.
Deployment of CDMA opens up a whole new revenue stream through which China Unicom will better compete with China Mobile by targeting high-end users, he said.
Beside the benefits of the domestic listing, the procedure itself may also not be too complicated.
"The domestic listing of redchip companies (Hong Kong-listed mainland firms) will be much easier to do than 'pure' overseas companies," said Xie Taifeng, president of the R&D Centre of the Beijing Securities.
He said redchips always have a close relationship with the government which will help them overcome policy barriers.
As there are still no overseas companies, including redchips, that are allowed to go public in the A-share market, China Mobile and Unicom's domestic listing will be a milestone in the history of China's stock market.
"The government should open the A-share market to the redchips and help them broaden their capital inflow channels," said Xie.
The home market is regarded by overseas-listed companies as a more risky investment compared to those in New York and Hong Kong.
"The domestic stock market may be more cruel than the overseas markets which are fully developed and have strict regulations," said Jay Hu, vice- president of Xin De Telecom International Venture, a telecoms financing house.
But he said the home market should not be seen as a safety net for the two companies.
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