China Unicom sees windfall from parent’s mixed-ownership reform deal

China Unicom, the country’s second-largest mobile network operator, is poised to receive a huge windfall worth HK$88 billion (US$11.25 billion) from the mainland government’s first test case under its ambitious mixed-ownership reform scheme for state-owned enterprises.

The company said in a regulatory filing late on Tuesday that its Shanghai-listed parent, China United Network Communications, has agreed to buy about 6.6 billion new China Unicom shares at HK$13.24 each through its subsidiary Unicom BVI.

That amount represents about 100 per cent of the total funding raised by China United Network from its sale last week of a 35.2 per cent stake to a group of major private mainland investors under its mixed-ownership reform plan, according to Jefferies equity analyst Edison Lee.

The agreed price per share in the Unicom BVI deal represents a 10 per cent premium to China Unicom’s closing price of HK$12.04.

“We see this as a hugely positive gesture that shows the interest of the A-share company and Hong Kong-traded China Unicom are aligned,” Lee said. “This will alleviate market concerns that the share placement was to be done at a discount, causing even more dilution.”

About HK$46.8 billion of the proceeds from China Unicom’s new share subscription will be used for upgrading its 4G mobile network, while HK$23 billion will be for technology validation and launch of 5G network trial programmes, the company said.