By Matt Pottinger
BEIJING, Sept 2 (Reuters) - Chinese regulators have ordered
China Unicom, the country's number two telecommunications
player, to kill more than 40 "irregular" joint ventures with
foreign investors by the end of this month, Unicom said on
Thursday.
The move is sure to fuel the flames of a bitter dispute
between Unicom and more than two dozen foreign firms that have
poured $1.4 billion into the company's mobile phone and fixed
line networks through an unorthodox joint-venture scheme.
The scheme, called China-China-Foreign (CCF) joint ventures,
was used to skirt a prohibition on foreign ownership in domestic
telecoms operators.
Companies including France Telecom <FTE.PA>, Bell Canada
<BI.TO>, NEXTEL <NXTL.O> and Sprint <FON.N> set up legal joint
ventures with Chinese companies which in turn invested in
Unicom.
But last year Beijing declared CCF ventures "irregular" and
ordered Unicom to unwind the contracts.
The Ministry of Information Industry issued a document this
week reiterating that the CCF ventures violated government
regulations and "must be corrected," China Unicom said in a
statement on Thursday.
CLEAN-UP
The document said Unicom would have to conduct "an
appropriate clean-up of all CCF ventures before mid-September or
the end of Sepetember at the very latest," according to the
statement.
Unicom has already frozen or delayed revenue sharing with
its joint venture partners, and has offered to buy out some of
them for the cost of their initial investment plus roughly 17
percent in interest.
But several of the foreign companies have banded together
and demanded equity in Unicom or buyout packages that take into
account lost potential revenues and the costs of supporting the
networks -- figures two or three times the initial investments.
Some have also threatened to try to block a planned initial
public offering by Unicom in Hong Kong and abroad by complaining
to securities watchdogs in their respective countries.
Daewoo Corp <03810.KS>, which poured more than $100 million
into mobile phone networks in the provinces of Zhejiang and
Heilongjiang, notified Unicom last month that it is preparing to
seek arbitration.
Unicom announced earlier this year that it would seek a
US$1.0 billion stock listing this October.
But one foreign executive said the battle over CCF had
forced Unicom to press the listing date off until next year. At
the same time, Unicom was hoping to raise the listing price to
$5.0 billion, he said.
Yang Xianzu, chairman of Unicom, said the end of CCF
contracts would not mean an end to cooperation with foreign
companies.
"An early resolution of the CCF arrangement will help create
the conditions for new coopertations that comply with the
government regulations and could avoid unnecessary economic
losses," he was quoted in the statement as saying.
REUTERS
Rtr 11:07 09-02-99
Copyright 1999, Reuters News Service |
