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To: Clarksterh who wrote (244)	7/26/1999 9:26:00 PM
From: Ramsey Su	Read Replies (1) \| Respond to of 13582

Clark, from SCMP. Tuesday, July 27, 1999 CHINA Unicom listing faces delay over wrangling WANG XIANGWEI and REUTERS -------------------------------------------------------------------------------- China Unicom could delay its much-anticipated flotation to early next year because of market volatility and wrangling with foreign investors over the controversial China-China-Foreign (CCF) joint-venture contracts, according to sources close to Unicom. The mainland's second-largest telecommunications carrier also appeared set to increase the size of the flotation to about US$3 billion through a dual listing in Hong Kong and the United States, the sources said. Reports have indicated China Unicom was cleared to come to the market in October to raise up to $1 billion. The possible delay comes amid reports some foreign investors involved in CCF schemes are preparing for litigation to undermine China Unicom's listing. "Lots of us are preparing for litigation on this," said a Beijing-based executive whose company has money tied up in now-defunct joint ventures with Unicom. Asked whether his firm would lodge a complaint with the US Securities and Exchange Commission, he said: "You bet." Sources close to Unicom yesterday played down the prospects that the company would be embroiled in lawsuits. "We are still negotiating with those investors and we have not heard of any company planning such a move," one source said. "We are still confident that satisfactory agreements would be reached in time," he said. Officials from China Unicom were not available for comment yesterday. Analysts said the wrangling would probably delay Unicom's share offering but they believed those foreign investors were using litigation to pressure Unicom into coming up with better settlement offers. China Unicom has given investors an ultimatum to back out of the CCF schemes by the end of next month. In recent years, foreign companies, including many foreign telecom giants such as Sprint and France Telecom, have invested more than $1.4 billion in more than 40 joint ventures with mainland partners which then set up joint ventures with China Unicom to operate mostly mobile-phone networks across the country. China Unicom conceived the CCF formula to skirt an official ban on foreign direct investment in the telecoms sector as the firm, launched in 1994, sought foreign capital and technology for its network in a bid to challenge the dominant China Telecom. Beijing has ordered Unicom to pay compensation to investors. Although some investors have agreed to Unicom's settlement offers, many others have disagreed, saying the offers, which included full reimbursement of original investments plus a few per cent interest, fell far short of what they deemed acceptable. In addition to the repayment of investments, one executive said Unicom should foot the bill for marketing costs, maintenance of the joint ventures and lost potential revenues. "We're providing a long-term investment for 15 or 20 years," the executive said. "Now we're being asked to leave in three years. Where are the earnings? Even if they pay 100 per cent or 200 per cent on the cost, it's not going to cover it," he said. The government has argued that the CCF joint ventures never had legal status and the formula was not in line with international practice.