China Communications boosts IPO size by 12pc
China Communications Services, a unit of China Telecom Group, has raised the size of its initial public offering up to 12 per cent to US$364 million on the back of strong investor demand, market sources said.
China Communications boosted the indicative range of the 1.29 billion H shares on offer to HK$1.70 to HK$2.20 each from between HK$1.56 and HK$1.96.
'It has the [third-generation mobile] concept,' said Louis Wong, a director of Phillip Securities, which intends to buy shares. 'The operators have to face hefty capital expenditure and unknown subscriber growth, but for an equipment supplier and service provider like China Communications, it will benefit and the outlook is more certain.'
The mainland government is widely believed to issue 3G mobile licences next year, and telecommunications companies may spend 200 billion yuan developing the infrastructure, the China Mobile Communications Association said.
China Communications, which provides engineering and technical support services to telecommunications companies, began meeting investors on Monday and will decide on a final share price on December 1. Shares will begin trading in the following week.
China Communications will sell a 9.65 per cent stake to China Mobile Communications, the parent of the world's largest mobile firm by user numbers, and a 4.5 per cent stake to China United Communications, which controls the country's second-largest mobile carrier.
United States networking equipment maker Cisco Systems will take a 4.2 per cent stake for US$50 million and International Data Group (IDG), a technology research and venture-capital firm, will pay US$10 million for a 0.84 per cent stake.
Cisco is prevented from selling its stake for 18 months after the IPO while IDG cannot sell its stake for six months, according to the terms of the share sale.
China Telecom, which controls the mainland's dominant fixed-line telephone operator, will hold 58.8 per cent of China Communications after the IPO, down from 66.75 per cent.
China Communications has the right of first refusal to acquire the remaining 15-province telecommunications support services business from its parent in the 12 to 18 months after the IPO, according to a report from bookrunner China International Capital Corp.
