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August 17, 2017

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Telecoms group raising US$11.7b in private capital

Source: Agencies | 00:01 UTC+8 August 17, 2017 | Print Edition

TELECOMS group China Unicom is raising US$11.7 billion from about a dozen investors, including tech giants Alibaba and Tencent, as part of China’s push for state-owned enterprises to be revitalized with private capital.

The deal represents the largest capital raising in the Asia-Pacific region since insurer AIA’s 2010 market debut, as per Thomson Reuters data. It would also be the biggest deal in recent years under China’s mixed-ownership reforms.

The government is seeking to rejuvenate state behemoths with private capital, with China Unicom among the first batch of SOEs slated for mixed-ownership reforms under guidelines issued in 2015.

The board of China Unicom’s Shanghai-listed unit, China United Network Communications Ltd, has approved an issue of shares to the investors, who also include Baidu and JD.com.

Investors will get a combined 35.2 percent stake in the Shanghai unit and will be allotted three board seats, the group’s Hong Kong-listed unit, China Unicom Hong Kong, said yesterday.

Other major companies that have agreed to invest in China Unicom include China Life Insurance, ride-hailing company Didi Chuxing, and Shenzhen-based Chinese technology conglomerate Kuang-Chi Group.

“The mixed ownership will raise the innovation capability of the company ... allowing us to transform from a traditional operation to an integrated operator,” said Lu Yimin, president of China Unicom Hong Kong.

The deal is expected to be completed by end of the year, he said.

Formally known as China United Network Communications Group Co, China Unicom is one of the world’s largest mobile carriers by user numbers but has faced a fiercely competitive market.

The group plans to use the proceeds to enhance its “4G capability, conduct 5G technical network trials and related business functions,” as well as invest in “innovative” businesses, the Hong Kong unit said in a presentation.

China has thousands of SOEs, many of them bloated and debt-ridden, and the reforms are aimed at creating conglomerates to compete on the world stage.

Other SOEs selected for the mixed-ownership reform scheme include China Eastern Air Holding, China Southern Power Grid and China State Shipbuilding Corp.

Analysts have said mixed-ownership reform could be a game-changer for China Unicom. The investors will subscribe to about 9 billion new shares and purchase 1.9 billion shares of the Shanghai-listed unit from China Unicom group at a price of 6.83 yuan per share, resulting in a total investment of about 78 billion yuan (US$11.7 billion).

China Unicom group’s holding will fall to 36.7 percent from 62.7 percent after the deal.

Share trading in its Shanghai-listed unit has been halted since it said in early April it would be part of the pilot. The stock’s last close was at 7.47 yuan.

Prior to the suspension, the unit’s market value topped US$23 billion.

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