China Unicom

Sasac dismisses Unicom restructure, asset sale talk

PUBLISHED : Wednesday, 28 March, 2007, 12:00am
UPDATED : Wednesday, 28 March, 2007, 12:00am

China Unicom, the country's second-largest mobile operator, is not involved in restructuring and selling its mobile network assets to other telecommunications operators, a spokesperson for the State-owned Assets Supervision and Administration Commission, the ultimate shareholder, told mainland media yesterday.

China Unicom is due to report its final results tomorrow. Net profit before one-off items might have increased 12 per cent to 22 per cent to between 5.5 billion and six billion yuan from 2005, analysts said.

Shares in China Unicom closed up 4.1 per cent at HK$10.66 yesterday. The stock has gained more than 60 per cent over the past year as investors believed the company's mobile network assets might be sold as part of an industry restructuring.

'At this moment, we don't have such a plan [to break up Unicom],' the Sasac spokesperson told the China Securities Journal yesterday, adding the plan was only market speculation.

Since the end of last year, market rumours have swirled that a proposal on restructuring the telecommunications industry had been submitted to the central government. The plan would consolidate the existing four operators into three and they would be entitled to operate mobile business.

China Unicom's CDMA assets would be sold to fixed-line operator China Telecom, while its GSM assets and other fixed-line business would be merged with fixed-line operator China Netcom, the rumours claimed.

China Mobile would remain as the country's largest operator.

'It should be true that China Telecom will take the CDMA assets, but it takes time to secure final approval,' a source said.

China Unicom's CDMA business is expected to record its first full-year profitability since it was launched in 2001 and be the positive factor in the company's performance.

Goldman Sachs estimated the business recorded a pre-tax profit of 909 million yuan.

China Unicom's net profit will be hit by a loss from the issue of a US$1 billion convertible bond to South Korea's SK Telecom in July last year.

Broker Cazenove said the exceptional loss would be about two billion yuan as it counted in the difference between the conversion price of HK$8.63 and the market price.

This would not have any impact on the firm's cash flow, although it would decrease its reported attributable profit by 35 per cent, it said.

Everbright Securities telecommunications analyst Wong Chi-man said the focus of interest in the results would be China Unicom's strategy on CDMA marketing and capital expenditure.