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China Telecommunications to list service arm

China Telecommunications Corp, the parent of Hong Kong-listed China Telecom, has filed an application to the stock exchange to spin off its telecommunications engineering and technical service arm, sources said.

The unit, China Communications Services Corp, is expected to launch the initial public offering next month. The company is seeking about HK$2 billion by selling new H shares. Goldman Sachs and China International Capital Corp are the joint sponsors for the deal.

A listing in Hong Kong will make China Communications the second publicly traded unit of China Telecommunications.

China Telecom, which owns China Telecommunications Corp's business in 21 mainland provinces, listed in Hong Kong in November 2002.

China Telecommunications last month won approval from the State-owned Assets Supervision and Administration Commission to establish China Communications.

The telecommunications group owns 91.5 per cent of China Communications, while subsidiaries Guangdong Telecom Industry Group and Zhejiang Telecom Industry Group hold 6.2 per cent and 2.3 per cent respectively.

China Communications will include the telecommunications engineering and services businesses in Shanghai and provinces including Guangdong, Fujian, Hainan, Hubei and Zhejiang.

Details of the company's operations have not been disclosed. Analysts said that the telecommunications engineering business enjoys stable income and profit but lacks growth potential.

China Communications provides network maintenance, technical services, telecommunications equipment and engineering works to China Telecom's subsidiaries.

CLSA estimates that China Telecom pays about three billion yuan a year for these services.

Wang Xiaochu, president of China Telecommunications, is expected to be the chairman of the spun-off entity.

Mr Wang has said that China Communications would serve not only China Telecom, but also other mainland operators such as China Mobile, China Unicom and China Netcom.

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