Unicom Deal Eases Concerns (South China Morning Post)
HUI YUK-MIN
China Unicom, China's No 2 telecommunications
operator, is planning to lease a CDMA network from its
parent in a bid to ease fund managers' concerns of
potential competition between the parent and the
SAR-listed vehicle on providing mobile services.
Li Zhengmao, company executive director and
vice-president, said the company was about to propose to
its parent, China United Telecommunications, an
exclusive leasing arrangement on the pending Great Wall
CDMA [code division multiple access] mobile network.
Under the proposal, the listed company would pay a
leasing fee to the parent to enjoy exclusive operating
rights to the Great Wall CDMA network, while the
parent would bear the cost of developing the network.
Great Wall is a joint venture between the People's
Liberation Army and the Ministry of Information
Industry.
Early this month, the parent completed the takeover of a
CDMA mobile network from Great Wall
Communications.
The lease would allow the SAR-listed vehicle to operate
a CDMA network alongside its existing GSM (global
system for mobile) wireless network, saving China
Unicom from direct competition with its parent.
Mr Li said that the original plan had been for the parent
to run the network, and only inject it into the listed vehicle
once it became profitable. However, the plan changed
after fund managers and major investors expressed their
worries on potential competition between the listed
company and the parent if they operated mobile services
separately, said Mr Li.
Through the new arrangement, the listed company would
avoid heavy development costs for expanding the
network.
"We do not need to bear any capital expenditure for the
network development. Our only cost would be the
network leasing fee," Mr Li said.
Capital expenditure for building a 2.5G CDMA network
with capacity for 10 million users in two years would be
between 15 billion yuan (about HK$14.05 billion) and 18
billion yuan. By leasing the network, it would only cost
China Unicom about 1.4 billion yuan to 1.67 billion,
according to analysts' estimates.
China Unicom is still finalising details with its parent but
Mr Li believed the proposal would be approved.
He expected the network to be in operation by the fourth
quarter of the year. Shares in China Unicom continued
rising and closed up 4.72 per cent or 60 HK cents at
HK$13.30.
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