JPMorgan Chase

China Telecom downplays gearing

PUBLISHED : Wednesday, 29 October, 2003, 12:00am
UPDATED : Wednesday, 29 October, 2003, 12:00am

China Telecom has downplayed its gearing level by almost 20 per cent after completion of an 80 billion yuan (HK$74.32 billion) acquisition of six networks from its parent, a circular sent to shareholders shows.

The circular, issued by independent financial adviser JP Morgan, also indicated that a number of lawsuits were pending against the companies but these had arisen in the normal course of business and would have no effect on the acquisitions. JP Morgan said China Telecom's total debt at the end of June would rise 303.2 per cent to 94.87 billion yuan after the buy-outs were complete.

JP Morgan was hired by China Telecom's independent board committee to advise on whether the terms of the deal were fair to independent shareholders.

According to JP Morgan, which based its calculations on the traditional definition of a gearing ratio, the deal would bring China Telecom's total debt-to-capitalisation level to 44.1 per cent. The figure was nearly 20 per cent higher than that claimed by the fixed-line carrier when it announced the acquisition.

On Monday, the carrier said its gearing ratio after the purchase would rise to 37.2 per cent from 12.7 per cent, a figure in line with some analysts' calculations.

However, even with a gearing ratio of 44.1 per cent, JP Morgan said China Telecom remained at a 'reasonable level compared with other telecommunications companies'.