Unicom listing a success
Source: China Daily
Publication date: 2000-06-25
China Unicom's listing in both New York and Hong Kong last week was worth more than the
capital it raised.
The country's second-largest telecom service operator, overcoming a host of unanticipated
difficulties on its road to going public, saw its IPO (initial public offering) oversubscribed three
times raising US$4.92 billion in capital.
The company might have had even greater success had it gotten listed on the stock markets last
year.
So-called CCF (China-China-Foreign) projects distressed China Unicom for nearly a year and
delayed the company's well-designed fund raising and network expansion programmes.
CCF was an irregular fund-raising operation which actually allowed foreign investors to have a
stake in China's telecom service market, which has been forbidden.
The government ban, which came after the debuts of 45 CCF projects, left China Unicom
millions of US dollars in debt after it compensated firms for deals it was forced to terminate.
Ironically, the CCF disputes were basically settled by October last year, only one month before a
landmark Sino-US WTO agreement which permits foreign investors to take a maximum 49 per
cent stake in a joint telecom service firm.
Misfortune has continued to dog this Unicom's growth plans. A proposed CDMA network,
supported conceptually by the government, has forced China Unicom into a dilemma involving
possible commercial losses and political loses.
The State Council's CDMA authorization in late 1998 granted China Unicom an unprecedented
opportunity to capture market shares from its mammoth rival the former China Telecom,
however, the project became a negotiating point in the country's WTO negotiations.
Big deals have been made during the ensuing two years on the national level at the expense of
the CDMA project.
Because of the emergence of third generation telecom technologies,establishing a narrow-band
CDMA network is no longer wise.
For reasons unstated, China Unicom continued touting its CDMA project during a recent road
show. But its IPO Prospectus excludes mention of anything related to the company's CDMA
project.
China Unicom has, however, benefited from government's support in the form of favourable
service prices and a gift of ownership of the country's largest paging operator which cost the firm
nothing.
Despite the risks associated with uncertain governmental policies, foreign investors have high
expectations for China Unicom, an emerging full player in China's telecom service market.
Their investment decisions are based on the huge potential of both China's telecom market and
Unicom's expansion capabilities.
The opening-up of the telecom service market is certain now with China likely to join the WTO
later this year or early next year.
China Unicom's performance itself is quite persuasive.
The company embraces a full range of business portfolios from mobile communications, fixed
lines to Internet access services. Its flagship mobile user pool surpassed 10 million in mid-June
and it has added 200,000 new subscribers a week in recent months.
The China Unicom listing means the company has capital it needs to modernize its
management.
Like many State-owned enterprises, China Unicom, established in 1993, is still hindered by an
outmoded and bureaucratic management system.
Many of China Unicom's employees expected to get salary increases in the wake of the listing.
Whether this occurs immediately,the introduction of an advanced management system means
stability and possibly more bonuses in the future.
Publication date: 2000-06-25 |
