China Unicom

Independent advisers back China Unicom's purchase of fixed-line assets

Deal to buy parent firm's fixed-line network now awaits approval of shareholders and regulators

PUBLISHED : Friday, 30 November, 2012, 12:00am
UPDATED : Friday, 30 November, 2012, 2:53am

China Unicom (Hong Kong) has moved a step closer to acquiring its parent company's fixed-line infrastructure on the mainland, following the deal's endorsement by the carrier's independent board committee and financial adviser.

The country's second-largest wireless network operator last week agreed to pay 12.2 billion yuan (HK$15.2 billion) in cash for Unicom New Horizon Telecommunications from state-owned parent China United Network Communications Group.

Unicom New Horizon controls the fixed-line network assets that Unicom leases.

In a filing with the Hong Kong stock exchange yesterday, Unicom's independent board committee and financial adviser Rothschild both recommended the deal to the carrier's independent shareholders, who will vote on it at an extraordinary general meeting on December 21.

The deal is also subject to regulatory approvals on the mainland, including that of the State-owned Assets Supervision and Administration Commission.

In the same filing yesterday, Unicom chairman Chang Xiaobing said: "The consideration [for the purchase] will be satisfied from the company's internal funds and financing sources."

Unicom last week said the acquisition was being pursued as its network lease agreement with Unicom New Horizon would expire on December 31.

The estimated savings on future network lease fees were expected to "exceed the incremental depreciation, amortisation and financial costs arising from the proposed acquisition", it said.

The proposed deal is also expected to bolster Unicom's efficiency since the fixed-line assets' operations will be included in its planning.

Macquarie Capital Securities analyst Lisa Soh said in a report the proposed acquisition's impact on Unicom's operating expenditure and capital spending would be limited.

"Unicom, under the terms of its lease agreement, already bears the ongoing cost and expenses for the maintenance and management of these assets," Soh said.