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Wang Xiangwei

China Unicom has baulked at what it sees as excessive demands from SAR-listed CCT Telecom Holdings and Italy's Stet to unwind three mainland-based mobile phone joint ventures banned by Beijing, according to sources.

 As a result, the sources said, the mainland's second largest telecommunications operator has decided to go ahead with its plan to float up to US$3 billion in shares in Hong Kong and New York later this year, excluding the joint ventures.

 'China Unicom has already instructed its auditors to stop auditing the three ventures,' one source said.

 'This means the three ventures will not be included in the listing vehicle.

 'It also means that the preferential terms offered to the two firms will no longer be on the table.'  He said that CCT and Stet, the international investment arm of Telecom Italia, had asked for too much during the negotiations.

 But he said the door for further talks remained open.

 Officials from CCT and Stet were not available for comment yesterday.

 The sources said the perceived intransigence of the two companies had started to interfere with China Unicom's listing schedule.

 They said the telecoms operator has either concluded, or is close to, signing agreements with the rest of its foreign investors to terminate its controversial joint venture contracts, known as China-China-Foreign (CCF) projects.

 More than 20 foreign companies, including CCT and Stet, have invested $1.4 billion in more than 40 joint ventures with Unicom, mostly to operate mobile phone networks.

 Foreign investment is officially banned in the mainland telecoms sector, but the investors skirted this by first setting up joint ventures with mainland companies, which then invested in Unicom mobile-phone ventures.

 However, the central government last year declared the ventures 'improper', and ordered China Unicom to buy out its foreign partners.

 After months of public acrimony and private horse-trading, key partners including Bell Canada, Siemens, AT&T, Sprint, AIG Asian Infrastructure Fund, and France Telecom have agreed in principle to accept the offers to unwind the deals, sources have said.

 However they declined to offer details of settlement offers.

 China Unicom late last year announced termination agreements with Macromedia International Group, and Nippon Telegraph & Telephone (NTT).

 Sources have said that CCT's and Stet's demands to sell their stakes in the three mobile phone ventures have been far too high.

 CCT holds a 51 per cent stake in Shanghai CCT-McCaw Telecommunications System, a joint venture with the Shanghai municipal government and a US investor.

 That venture in turn holds 60 per cent of a GSM mobile phone network in Shanghai and 80 per cent of another in Shanxi province.

 Little is known about Stet's joint venture in the northeastern province of Jilin.

 In October, CCT chairman Clement Mak said its Shanghai venture, one of the most profitable among China Unicom's portfolio, was valued at $900 million. CCT's effective interest was worth about $300 million, he said.

 CCT's initial investments were $11.81 million for the Shanxi project and $22.1 million for the Shanghai venture.



Unicom baulks at demands