SmarTone Mobile Communications Ltd is a mobile phone operator in Hong Kong, and partly owned by Sun Hung Kai Properties. SmarTone was launched by Sun Hung Kai Properties and ABC Communications in 1992.
SmarTone completes first bond offering
Mobile network operator SmarTone Telecommunications has completed a US$200 million bond offering that will help finance the company's bid to renew its 3G spectrum licence in 2016.
This is the first foray by SmarTone, a subsidiary of Sun Hung Kai Properties, into the international bond market. The 10-year notes issue, which is guaranteed by the company, carries a coupon of 3.875 per cent and a yield premium of 215 basis points above comparable US Treasury yields.
In a filing with the Hong Kong stock exchange yesterday, SmarTone said the net proceeds would be about US$196 million after deducting the fees and expenses connected with the issue. It said that the proceeds "will be used primarily for general working capital purposes … providing additional flexibility to make future capital investments in spectrum and infrastructure".
Patrick Chan Kai-lung, executive director at SmarTone, said that the bond offering was executed primarily in preparation for renewing the company's 3G spectrum allocation in 2016. "We wanted to take advantage of the low, long-term interest rates which are available now," Chan said.
SmarTone, CSL, Hutchison Telecommunications Hong Kong and PCCW's HKT have called on the government to follow international practice by automatically renewing their 3G spectrum allocations in the 1.9 gigahertz to 2.2GHz band, which are due to expire in October 2016.
The government, however, has drawn up a so-called hybrid approach in which a third of each operator's 3G spectrum allocation will be seized and auctioned off to boost competition and maximise use of the spectrum. This plan is up for public consultation, which closes on April 11. Douglas Li, chief executive at SmarTone, said last week that the company would start investing in new infrastructure this year to make up for lost spectrum "to the extent that we can", should the government carry out its plan and the price of licence fees then balloon.
SmarTone last week bid HK$640 million to win two chunks of 4G mobile spectrum that the government had auctioned. Chan said this investment was "fully funded by the company's operating cash flow".
The debut bond offering was snapped up by fund managers, insurance companies and private banking investors, according to sources.
They said the unrated issue was completed faster than the typical six-to-eight-week process. "We kicked off on March 11, issued the preliminary circular on March 21, conducted our roadshow and had the issue priced on Wednesday," one source said.
HSBC, Standard Chartered and UBS served as the bond issue's joint lead managers.