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Three banks vie for role in Netcom A-share sale

China Unicom

Three mainland investment banks have presented proposals to underwrite an A-share offering by China Netcom Group Corp, state media reported yesterday.

China International Capital Corp, Galaxy Securities and Citic Securities are seeking to secure the mandate for an A-share initial public offering, most likely in Shanghai.

'We have a plan to list domestically but no specific timetable or concrete details as yet,' said Wang Xia, a spokesman for Netcom.

A mainland listing is conditional on the securities regulator lifting a year-long ban on new share issuance, something sources say is likely to come next month.

Netcom rose 0.36 per cent yesterday to close at $13.75, but analysts warned fears that a domestic share issuance would dilute its H shares could weigh on the stock.

'Issuing new shares will mean dilution, which will be pretty negative for Netcom's share price,' said Francis Cheung, the head of telecommunications at CLSA.

The firm needs capital to pay for Olympics Games-related construction and to prepare for the long-awaited granting of 3G licences that is expected in the coming months.

Netcom has reportedly won the contracts to build the media village and national convention centre for the 2008 Olympic Games in Beijing.

'The listed vehicle is very highly geared so obviously they need some new capital to fund the forthcoming 3G operation,' said Marvin Lo, a telecommunications analyst at BNP Paribas Peregrine.

The political mood in Beijing is also very much in favour of encouraging, or even pressuring, companies that have listed in Hong Kong and abroad in recent years to return to the motherland.

This will support a tentative revival in the domestic markets and give mainland investors a chance to invest in the country's largest and best-performing enterprises, which they have been denied due to strict controls on capital outflow.

China Unicom already has an A-share listing in Shanghai, and China Mobile has said it plans to raise capital at home once regulatory developments allow.

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