China Telecom to spin off network services unit in HK
China Telecom Corp chairman Wang Xiaochu yesterday confirmed the mainland fixed-line telecommunications giant would spin off its network and engineering services unit for a Hong Kong listing.
Market sources said the new company, China Communication Services, would look to raise between US$200 million and US$400 million in an initial public offering in the second half. Goldman Sachs and China International Capital Corp are the deal sponsors.
China Communication Services will include the telecommunications network design and engineering businesses in six provinces and cities - Shanghai, Guangdong, Fujian, Hainan, Hubei and Zhejiang - which have a total asset value of 23 billion yuan, according to mainland media.
'The company's restructuring is pending approval. Once we get it, we will consider listing the company on the Hong Kong stock market,' Mr Wang said after the annual general meeting yesterday. He declined to give further details.
'The new company can help mobile operators such as China Mobile and China Unicom with network design and other related services. We have the talent and we can broaden our customer base.'
The nation's telecommunications operators are preparing for an increase in capital spending when China issues 3G mobile licences. The government has not given a timetable for granting the licences or said how many it plans to issue.
Meanwhile, Mr Wang said the company had no need to raise funds in the A-share market, citing its free cash flow after a number of years of double-digit growth.
For the business operation, he said the two future growth engines - 3G and internet protocol television - were still waiting for regulatory approval.
Mr Wang said he was confident that China Telecom would be awarded a 3G licence and would be able to provide a service within seven or eight months thereafter.
'From the international perspective, China should accommodate more that two mobile operators. China Telecom can be a mobile player in China as we have more than 500 billion yuan in assets. We can make better user of our existing telecommunications assets and increase returns,' he said.
Sources said that China Telecom had set up a wireless service department for mobile services. The company will start mainland trials using the TD-SCDMA standard at 100 cell sites by the end of this month.
