China Unicom (Hong Kong), which operates the country's second-largest wireless network, has agreed to pay 12.17 billion yuan (HK$15 billion) in cash to buy its parent company's fixed-line infrastructure on the mainland.
The proposed deal covers 100 per cent equity interest in Unicom New Horizon Telecommunications, which controls fixed-line network assets in 21 provinces and cities, from state-owned China United Network Communications Group.
In a filing with the Hong Kong stock exchange yesterday, Unicom said the transaction 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 deal is scheduled to close by the end of next month.
Unicom said that completion of the proposed deal would help increase its earnings and "be conducive to increasing the long-term value" for its shareholders.
The acquisition was also expected to "enhance operational and management efficiency" since the fixed-line telecommunications network assets and business would be included in the carrier's planning.
According to the asset appraisal report for the proposed deal, the book value of shareholders' equity of Unicom New Horizon was 11.39 billion yuan as of September 30. The company's net profit for the nine months to September was 1.16 billion yuan.
The share price of Unicom, which announced the proposed deal after the market closed yesterday, rose 1.2 per cent to HK$11.84.
Rival China Telecom, by comparison, will be paying a greater amount for its previously announced network acquisition, which will also close at the end of next month.
The world's biggest fixed-line network operator agreed in August to buy the wireless infrastructure of its state-owned parent, China Telecommunications Corp, for 84.6 billion yuan. The deal would also allow China Telecom to boost its operating efficiency and cut expenses by avoiding the escalating costs of leasing that network.
China Telecom's shares rose 1.9 per cent to close at HK$4.25.