Unicom sells convertible bonds to raise US$1.8b
China Unicom (Hong Kong), the country's second-largest wireless network operator, has raised a net US$1.82 billion through a sale of convertible bonds.
Unicom will use the funds from the offering, which it says is the largest convertible bond issue by a mainland firm, as working capital and to further develop its 3G and broadband networks, according to the carrier's filing yesterday with the Hong Kong stock exchange.
Macquarie Securities analyst Lisa Soh said rising demand for Apple's iPhone 4 and growing 3G subscriptions showed the carrier 'must continue to execute in expanding its mobile network'.
She said the bonds, which fall due on October 18, 2015, were issued 'on attractive terms from Unicom's point of view'.
Bearing an annual interest rate of 0.75 per cent, the bonds can be converted into either Unicom's shares listed on the Hong Kong exchange or American depositary shares listed on the New York Stock Exchange at HK$15.85 per share, a 35.5 per cent premium to the stock's close of HK$11.70 on Monday.
The bonds, which were issued through wholly owned subsidiary Billion Express Investments, were actively subscribed by global institutional investors.
'The completion of the bond financing will provide an even stronger capital support for the company's rapid growth moving forward,' Unicom chairman Chang Xiaobing said.
Parent firm China United Network Communications Group had earlier pursued its own financing initiatives.
Last week, it completed two commercial paper and promissory note issues totalling 20 billion yuan (HK$23.17 billion).
A report by Deutsche Bank said 'investors may not welcome the additional fund-raising activities from Unicom' because of the dilution of shares.
Assuming full conversion of the bonds, about 900 million shares will be created, representing about 3.82 per cent of the company's issued share capital.
Macquarie Securities said in a report the company's future acquisition would include telecommunications networks in 21 provinces that are currently leased from its parent firm.
It said the deal offered a 'very low acquisition risk'.
Unicom shares fell 4.3 per cent yesterday to close at HK$11.20.
