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SmarTone will stress that the growth of its cellular phone operations will not be hit by next year's launch of six new local competitors as it starts the public offer phase of its partial flotation today.

The SmarTone initial public offering (IPO) will be the first opportunity for local investors to buy into a specialist cellular phone company.

 The company is offering 17 per cent of its enlarged capital with the bulk of that being placed with international institutions.

 The public offering will amount to about 2.6 per cent of the new share structure.

  The retail offer closes at noon on Friday.

  Analysts expect demand for the stock to be good although there are concerns that the offer price, between $17.25 and $21.25 per share, does not reflect the heightened competitive environment in the cellular market.

 Six personal communication service (PCS) operators are due to launch next year and SmarTone already faces competition from three existing cellular GSM (global system mobile) operators.

  SmarTone itself failed in its bid to secure a PCS licence. Final pricing of the offer will be released late on Friday and the shares are expected to begin trading on the stock exchange on October 31.

    SmarTone chief executive Hubert Ng has spent much of the past two weeks meeting institutional investors in Europe and the United States.

 Stephen Wisch of Goldman Sachs, which is leading the global placing, said last night that 'interest had been good, led by Asia'.

 He rejected criticism that the offer was overpriced.

  'The shares are being offered in a price-earnings range of 12.8 to 15.7 based on 97's forecast earnings,' he said.

 'Compared to other similar companies in the sector that makes it very cheap.'    Based on a mid-point figure of the IPO share range, the offer will generate $1.6 billion and give SmarTone a market capitalisation of about $9.2 billion.

  The bulk of the cash raised, $920 million, will be used to finance expanding SmarTone's network, $350 million will go to cut debts, and the remainder will be used for working capital.

  Mr Ng said investors should not be unduly concerned by the competition from PCS operators, which have pledged to undercut the rates of current GSM operators.

  'These (PCS) operators will constantly be playing catch-up,' he said.

 'It will take them up to three years to get to where we are and in that time we will push ahead with our expansion programme both in terms of spreading our network and recruiting new subscribers.'  He said SmarTone would be forced to cut its tariffs if the PCS operators began to erode its market share.

  'We accept revenue per subscriber will fall,' he said.

  The company expects net profits in the year to June to surge to $610 million, up from $377.6 million last fiscal year.

 SmarTone is owned by Sun Hung Kai Properties (40 per cent), AT&T (30 per cent), ABC communications (15 per cent) and Town Khan, which represents the Chinese Ministry of Post and Telecommunications (15 per cent).



SmarTone dimisses threat from six new competitors