Netcom aims to raise up to $9.2b
China Netcom Group (Hong Kong), the listing arm of China's No 2 fixed-line carrier, has valued its initial public offering at between $8.1 billion and $9.2 billion, making it the third-largest share offering this year.
The company is expected to price its shares at between $7.80 and $8.80 each, representing adjusted forward earnings multiples of 7.1 to 8.1, according to market sources.
The pricing will be announced today as Netcom launches a two-week international roadshow in Hong Kong. It is also due to file its revised listing prospectus with the US Securities and Exchange Commission.
Netcom's underwriting syndicate has forecast adjusted profit growth for next year of 15 per cent, to about 7.6 billion yuan, against street consensus of 9.7 per cent profit growth for rival China Telecom Corp.
Netcom is forecasting a 9.15 billion yuan net profit for the current year.
When adjusted to exclude non-recurrent upfront connection fees, the projection is about 6.5 billion yuan.
China International Capital Corp, Citigroup and Goldman Sachs are the sponsors and global co-ordinators for Netcom's dual-listing plan.
One concern raised by a fund manager is the overhang of a possible acquisition of PCCW's fixed-line assets by Netcom's parent, China Network Communications Group.
'The parent company is heavily in debt and if it does buy PCCW's fixed-line assets, it may need [Netcom] to raise capital to fund the acquisition,' said the fund manager, adding that PCCW's core business was declining and would not add much synergy to Netcom.
Sources close to the talks said China Netcom Group may walk away from a deal with PCCW, as the parties have been unable to narrow a $10 billion to $12 billion valuation gap for the assets.
It is understood the two parties broke off negotiations several months ago.
