Unicom chooses key IPO partner

PUBLISHED : Wednesday, 30 June, 1999, 12:00am
UPDATED : Wednesday, 30 June, 1999, 12:00am

China Unicom, moving closer to a listing in Hong Kong or on the Nasdaq market in the United States - or possibly both - has appointed Morgan Stanley to underwrite the initial public offering (IPO), according to sources.

The fledgling telecommunications company said it wanted to raise up to US$1 billion to help it compete against giant China Telecom.

China Unicom officials have said the company might want to list shares in Hong Kong and in the US.

The Laodong Daily has reported the company would use proceeds from an offering to finance the development of a nationwide mobile telephone network.

Analysts have speculated that a listing by China Unicom could take place by November.

However, before China Unicom will be able to finalise a listing plan, it needs to resolve improper foreign investments.

Beijing has ordered China Unicom to look at ways of compensating foreign investors for improperly held stakes.

The government has revoked a so-called China-China-foreign formula that allowed multinational companies to sidestep foreign-investment regulations.

Nonetheless, it has yet to make clear how China Unicom is to compensate the foreign investors.

ChinaOnline has reported Beijing was considering three possible means by which the foreign investors may be compensated.

Under one proposal, China Unicom would buy out the foreign interests with a 10 to 15 per cent return on investments.

In another, the company could treat the investments as loans to be repaid with interest under terms set up by mainland banks.

It may also be allowed to issue IPO shares of equal value to the investments.

Duncan Clark, a partner at consultancy firm BDA China, said another option would be for Unicom to issue a convertible bond that could be converted to shares in the company.

He said giving overseas investors straight equity was unlikely. That was because such a move would probably result in a percentage of foreign ownership above the maximum amount being offered by Beijing in its negotiations to join the World Trade Organisation.