China Unicom launches retail tranche of IPO

The Hong Kong public can begin subscribing today for shares in China Unicom, the mainland''s second-biggest telecom company, at a price range of HK$13.66 to HK$15.84.

China Unicom has set an indicative price range for shares in the Hong Kong public tranche of its global initial public offering at HK$13.66 to $15.84 and increased the range for the institutional tranche by 10% to between HK$13.80 and $16, reflecting stronger-than-expected demand from investors.

The retail tranche is part of a worldwide offering in which China's second biggest telecom company plans to list 2.46 billion shares, or 25% of the enlarged share capital excluding an overallotment option of 368,869,050 shares. The shares will be offered to investors in Hong Kong, Europe and the US. Overseas investors can choose to buy their shares in the form of American depository shares, with each ADS representing 10 underlying shares. The ADSs will be listed on the New York Stock Exchange.

The company is offering the Hong Kong public 122,956,000 shares, or 5% of the 2.46 billion. That portion could increase to 7.5% if the shares are 15 times oversubscribed, to 12.5% if they are 50 times oversubscribed and to 20% if they are 100 times oversubscribed, says underwriter Morgan Stanley Dean Witter. At the bottom end of the retail range, the company would have a market capitalization on the Hong Kong Stock Exchange of HK$166 billion; at the top end, HK$193 billion. Investors in Hong Kong can subscribe for the shares beginning today. The offer closes Friday June 16.

Unicom raised the institutional price range from a previous range of HK$11.50 to HK$14.50, lifting the total amount it could raise, including the overallotment option, to $5.05 billion from $4.57 billion. The offer closes 16 June and will be priced shortly afterwards.

Waiting in line

"We find investors are reacting very positively to our presentations," says Yang Xianzu, Unicom's chairman and chief executive, at a video-linked press conference in Hong Kong yesterday. "Many tell us they have been waiting for this IPO for a long time."

The company plans to spend about HK$31.5 billion to expand the capacity and coverage of its cellular network, and about HK$4.07 billion to expand its fibre-optic transmission backbone network and to develop its internet business.

Unicom says it is talking to several international telecom companies that could take a strategic stake in Unicom as part of the IPO. It has already agreed to sell $400 million of shares to Hong Kong conglomerate Hutchison Whampoa. The company declines to name which companies it is talking to.

Unicom has confirmed it has terminated all the China-China Foreign joint ventures it was forced to wind up after the government ruled them illegal. It has returned Rmb 9.8 billion ($1.2 billion) in principal investments to the partners and Rmb4 billion in compensation, Yang says. The company also issued warrants to the companies to purchase shares in Unicom. If the warrants are exercised at the aggregate exercise price they are worth about Rmb 5.2 billion, which would represent about 2.06% of the enlarged share capital.

3G or not 3G...

Yang says the Chinese government has given Unicom approval to begin trials of a third-generation mobile phone technology, known as CDMA2000 and developed by Qualcomm of the US. If the trials prove successful Unicom may adopt it in two years, Yang says. In the meantime, Yang says, Unicom will focus on using GSM techology as opposed to Qualcomm's CDMA technology for its second-generation phone network. GSM is the standard in Europe, and is used by Chinese mobile phone operators. Chinese authorities will establish the technology standards for competing third-generation technology.

Says Yang: "We've decided to focus on GSM for our second-generation cellular service because we have already generated significant economies of scale."


Share our publication on social media
Share our publication on social media