AWSJ: China Unicom IPO Could Raise Up
To $4 Billion
By PETER WONACOTT
Staff Reporter
HONG KONG - China United Telecommunications Corp., mainland
China's second biggest phone company, aims to raise up to $4 billion from
an initial public offering next month and plans to sell part of the issue to
strategic investors, according to people close to the deal.
The listing, expected in New York and Hong Kong by the end of June, is
slated as one of China's largest and marks a new step in the gradual
opening of the country's telecommunications market. Called China Unicom
Ltd., the listed unit will include a cellular business that serves 12 provinces
where growth is fastest, an Internet service and less lucrative paging and
fixed-line assets, said persons involved in the issue. A premarketing effort
started Monday after Unicom filed Friday with the U.S. Securities and
Exchange Commission.
"It's an important company in a large market to which people want access,"
noted a banker close to Unicom. With its main rival China Telecom, which
raised $4.2 billion from a 1997 stock listing, Unicom operates an effective
duopoly over the mainland phone market. Still, competition between the
two has been lopsided, forcing the Chinese government to extend Unicom
special privileges, such as discounts on phone and paging services.
That has helped boost Unicom's earnings as it found new customers.
Mobile phone subscribers in the 12 provinces rocketed 250% to 4.2
million in 1999, and another 2.3 million have signed on in the first four
months of 2000. With increased market share, Unicom's net profit last year
jumped 55% to 839 million yuan ($101.4 million) from 1998 as revenue
increased 22% to 17.03 billion yuan. "You can see the government is
encouraging business competition between the two," said one banker
involved in the deal.
From the sale of about 25% of the company, Unicom plans to use cash to
upgrade cellular, long-distance and data networks as well as to build up a
fiber optic network.
Indeed, as with other recent China stock issues, some investors may bet
Unicom is too important to fail. Like the listing of PetroChina Co., China's
largest oil producer, it represents an effort to push privatization of a key
industry - even in the face of slack market demand. PetroChina ended up
selling about one-third of its $2.9 billion stock issue to a handful of
companies, most of them pro-Beijing Hong Kong property developers.
However, PetroChina also sold 20% of the offer to BP Amoco PLC and
formed a wide-ranging alliance with the British oil giant.
Unicom is now exploring similar strategic partnerships, according to a
banker close to the company. She declined to name the companies, adding
only that at least two Western telecom operators are involved in the talks.
Yet Unicom's history, though brief, is plagued by troubled foreign joint
ventures. After Unicom was launched in 1993, it entered some 40
foreign-funded projects by utilizing a loophole in the laws that restricted
foreign investment in China's telecommunications networks. Before its
stock listing could go ahead, however, Unicom was forced to unwind the
ventures and compensate the foreign partners.
In another possible blow to foreign companies working with Unicom, the
company has decided to set aside plans to develop its code division
multiple access, or CDMA, technology, in favor of upgrading its global
service for mobile communications, or GSM, network. |
