China Mobile, Unicom seek A shares
chinadaily.com.cn: Hou Mingjuan
2001/04/16
The prospected listing of China Mobile and China Unicom on the mainland stock markets
may bring both better than expected results, said telecom experts.
The firms are China's only two mobile telecom operators and are both listed on the stock
markets of New York and Hong Kong.
After announcing their 2000 year-end results in Hong Kong recently, which reported over 200
percent profit growth, both said they were considering issuing A shares on the domestic
stock markets.
But they are still waiting for government approval and there is no timetable.
Yang Xianzu, chairman of Unicom, said the company will set up a subsidiary and inject part of
its overseas-listed stocks into the new firm then list it on the stock markets in Shanghai or
Shenzhen.
The money collected from the domestic stock market will be used to fund the construction of
the CDMA network, or code division multiple access, the country's first such network in
mobile telecommunications.
The network, which will provide higher data delivering quality than the present GSM (global
system for mobile communications) network, has attracted interest from both investors and
customers.
China Mobile, the country's dominant mobile telecom operator, controls nearly 80 percent of
the market and operates only GSM businesses.
The company is expected to continue to have a high growth rate in the coming years and is
considered by major investment banks to be a well-run firm with excellent prospects.
"The shares of the two companies will become hot cakes in the domestic market as
investors have been eager for a long time to buy profit-rich telecom stocks," said Jim Lin,
chief telecom analyst of Frost & Sullivan, a US-based research house.
The domestic listing will be a boost to the companies' business as stock buyers are more
likely to adopt the companies' services which could significantly increase the user base, he
said.
Wu Jichuan, minister of the information industry, also said the government would support the
companies' domestic listing.
The mobile telecom sector has reported rapid growth in recent years and has become the
major source of income for the country's information technology industry.
But all telecom firms are listed overseas meaning domestic investors have no chance to buy
shares.
Market analysts expect the two firms' domestic listing will ignite a buying frenzy in telecom
shares.
However, some overseas investors fear that Unicom's domestic listing of CDMA related
business may hurt its overseas-listed GSM businesses as some customers prefer CDMA to
GSM.
But others said the domestic listing will benefit Unicom as a whole and will not hurt the
interests of the overseas-listed branch.
"Current fears that the deployment of CDMA services by Unicom will cannibalize China
Unicom's already listed GSM services are groundless," said Xinhua Liu, telecom analyst of
consulting firm Burson-Marsteller.
Unicom's new CDMA network uses the most updated technology that targets high-end users,
most of whom are now adopting China Mobile's service, instead of low-end users who are
mostly adopting Unicom's GSM service, said Liu.
Deployment of CDMA opens up a whole new revenue stream through which China Unicom
will better compete with China Mobile by targeting high-end users, he said.
Beside the benefits of the domestic listing, the procedure itself may also not be too
complicated.
"The domestic listing of redchip companies (Hong Kong-listed mainland firms) will be much
easier to do than `pure' overseas companies," said Xie Taifeng, president of the R&D Centre
of Beijing Securities.
He said redchips always have a close relationship with the government which will help them
overcome policy barriers.
As there are still no overseas companies, including redchips, that are allowed to go public in
the A-share market, China Mobile and Unicom's domestic listing will be a milestone in the
history of China's stock market.
"The government should open the A-share market to the redchips and help them broaden
their capital inflow channels," said Xie.
The home market is regarded by overseas-listed companies as a more risky place compared
to New York and Hong Kong.
"The domestic stock market may be more cruel than the overseas markets which are fully
developed and have strict regulations," said Jay Hu, vice president of Xin De Telecom
International Venture, a telecom financing house.
But he said the home market should not be seen as a safety net for the two companies.
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