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China Mobile

Investors rush to telecoms stocks on hopes from mainland audit

PUBLISHED : Friday, 28 September, 2007, 12:00am
UPDATED : Friday, 28 September, 2007, 12:00am

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Shares of mainland telecommunications companies surged after the National Audit Office confirmed it would carry out a two-month comprehensive audit of five state-owned operators to study their operating efficiency.

Shares of China Mobile and China Telecom, the leading mobile and fixed-line operators, rose 6.52 per cent and 13.23 per cent to record highs on news of the audit - to start next month - and rumours linking it to a possible industry restructuring.

China Unicom and fixed-line operator China Netcom gained 9.34 per cent and 6.12 per cent, respectively. Unlisted China TieTong, a unit of the national railway network, is the fifth company to be audited.

'The audit on the five operators will be focused on their operating efficiency, and encourage the operators to improve their operation and corporate management so as to boost their competitiveness,' the National Audit Office said in a website statement yesterday.

The audit was a regular task for the agency based on government rules, China Unicom vice-president Li Zhengmao said yesterday. 'The office does not relate the audit to restructuring as well. It is market speculation only. I have no update on the restructuring issue,' he said.

The market speculated that the government would bring forward a restructuring of the industry after the audit reports are completed.

Rumours have been rife that the government would like to reduce the number of major telecommunications operators to two or three, from four, in harness with the proposed issuing of licences to operate third-generation mobile-phone networks.

'The audit, which will take two months, clearly means that industry restructuring might not happen until next year, so 3G licences won't be issued until after that,' China Everbright Securities analyst Wong Chi-man said yesterday.

Another market watcher said the issue would be much clearer after next month's Communist Party congress when major policies should be worked out.

Shares of China Mobile, the nation's largest mobile operator, have almost doubled this year to HK$129, outpacing the 37 per cent gain in the Hang Seng Index. China Unicom, which has paced the index, closed yesterday at HK$15.92.

China Telecom, which gained only 5.4 per cent in the first eight months of this year, continued its recent recovery to close yesterday at HK$5.82, up 36.62 per cent since January. China Netcom remains down about 1 per cent this year at HK$20.65.