China Unicom Considers Selling
Minority Stake to Foreign Firm
public.wsj.com
Jan 17,2001
China Unicom Considers Selling
Minority Stake to Foreign Firm
By Robert A. Guth
Staff Reporter of The Wall Street Journal
HONOLULU -- China Unicom Ltd., a unit of China's second-largest telecommunications company, is considering selling a minority stake in itself to one of several foreign companies, including NTT DoCoMo Inc., Deutsche Telekom AG and AT&T Wireless Group , a Unicom executive said.
An alliance between Unicom and a foreign telephone operator could raise the stakes in the race to enter the potentially vast Chinese phone market and in the contest to set a world standard for next-generation mobile-phone technology.
In an interview at an industry conference here, Unicom Vice President Tan Xinghui said that the company is studying "a number of possibilities" for tie-ups with foreign telecom operators, which could include selling a minority stake. Unicom would use the money to expand its mobile service in China by buying assets, such as mobile networks, from its parent company, China United Telecommunications Corp.
In addition, Unicom hopes to learn from the foreign investor, Mr. Tan said. "The aim is to find a strategic partner to get money to do acquisitions and to use the company's expertise in management and operations to help Unicom become a world-class operator," he said. He said that Unicom might strike a deal sometime this year.
Mr. Tan said that Japan's largest mobile operator, DoCoMo, "is one kind of candidate" and he added that Unicom is also considering Deutsche Telekom, France Telecom SA and AT&T Wireless as potential investors. Though Unicom is "talking about cooperation with many operators," it hasn't started formal negotiations with the companies, he said.
Mr. Tan said Unicom is likely to model a deal on the pact reached in October in which Vodafone Group PLC of the U.K. paid $2.5 billion for a 2% stake in the Hong Kong-listed subsidiary of China Mobile Communications Corp., China's largest cellular operator.
Unicom, which last year listed its stock in Hong Kong and New York, operates mobile, fixed-line and pager businesses in China's eastern coastal provinces. Its parent operates a similar set of services in the inland provinces.
The $5.56 billion Unicom raised from the listings has given it enough cash to expand its network in the provinces in which it currently operates, Mr. Tan said. But over the next few years, it will buy mobile networks and subscribers in other provinces from its parent and will need additional money to do so. He said he couldn't estimate the cost of the acquisitions.
Unicom's plans come as foreign telecom providers are jockeying for position in China's recently deregulated telecommunications market. With over 70 million subscribers, China is the world's second-largest mobile phone market behind the U.S. China's population of mobile subscribers is expected to swell to around 200 million by 2005, according to industry estimates.
Given its size, China is a key battleground in the struggle to establish a global standard in so-called third-generation mobile technology. Called 3G for short, the technology will enable mobile phones to access the Internet at very high speeds.
DoCoMo is eagerly promoting one 3G technology, WCDMA, or wideband code-division multiple access, by investing in mobile operators with the expectation that they will build WCDMA networks in coming years. After taking stakes in operators in Europe and Asia, DoCoMo in November paid $9.8 billion for a 16% stake in AT&T Wireless. DoCoMo has also held talks with South Korea's SK Telecom Co. but the two companies couldn't agree on price, people familiar with the companies say.
A stake in Unicom would give both DoCoMo and WCDMA a strong foothold in China. But WCDMA is up against a technology called CDMA-2000 from Qualcomm Inc. of San Diego, while China's Ministry of Information Industry is pro moting a homegrown 3G technology.
Mr. Tan said that Unicom hasn't decided which 3G option it will choose. Still, Mr. Tan noted that WCDMA is gaining acceptance in Asia and the U.S. "That will influence our thinking," he said. |
