Unicom plans to raise about Rmb77.91 billion ($11.63 billion) from Tencent, Baidu, Jd.com, Alibaba and others, via the sale of a majority stake in its Shanghai-listed unit.
The bumper sale by China’s second-largest mobile carrier will take place via a private placement of 9.037 billion new shares and 1.9 billion shares existing shares in China United Network Communications, according to a filing in Hong Kong on Wednesday.
Unicom Group’s shareholding in it’s A-share-listed company will drop to 36.67%, while China Life Insurance will own 10.22%; Tencent will take a 5.18% stake; Baidu 3.3%; JD.com 2.36%; and Alibaba about 2%. In total the new investors will own a 35.2% stake in the enlarged share base.
China is overhauling its state-owned enterprises (SOEs) to make these linchpins of the economy more efficient.
Reforms have been slow given the Communist Party is determined to maintain its leadership in SOEs and avoid losses of state-owned assets. Progress is also less of a priority than propping up GDP growth and social stability. Of course there has also been push back as vested interests at the SOEs have gained significant political and economic influence through the years.
China has long vowed to reform and clean up its sacrosanct but inefficient SOEs, which have also become a breeding ground for clientelism, corruption and vested interests. Over 100 senior executives from some of the country’s largest SOEs have been investigated for graft amid President Xi Jinping’s ferocious anti-corruption campaign, according to official statistics.
Unicom is among the van guard of SOEs to be singled out for mixed ownership, the others were Eastern Airline, China Southern Power Grid, Harbin Electric, China Nuclear Engineering Group and China State Shipbuilding.
After Eastern Airline Group, said in June it would reduce its stake in Eastern Airline Logistics to 45%, stock analysts became more hopeful that Unicom would also be confident enough to give up control of its subsidiary and allow meaningful change.
Like those at Eastern Airline, Unicom staff will receive a windfall of 848 million shares in the A-share-listed company at a price of CNY3.79 per share, raising funds of Rmb3.213 billion. This is an incentive that stock analysts expect will drive a higher return on equity.
"The mixed ownership reform details are generally in line with our expectation and we
believe now the share catalyst is changing from being short-term news-driven to longterm
execution-driven," said Nomura equity analyst Joel Ying.
Unicom said it will cooperate with the strategic investors in cloud computing, big data, internet of things, artificial intelligence, Home Internet, digital content, retail system, and payment finance.
The National Development and Reform Commission has approved the plan.
Trading in the shares of the company were halted on Wednesday and will resume on Thursday.
China has about 155,000 SOEs. But only 113, ranging from well-known behemoths such as China Mobile and PetroChina, are directly managed by the State-owned Assets Supervision and Administration Commission due to their strategic significance. Most local government SOEs operate in non-strategic sectors.