China Communications Services Corp, a mainland telecommunications equipment manufacturer, and its mainland shareholder are trying to raise as much as HK$1.94 billion by selling new H shares to institutional investors. The two entities are offering 359.3 million shares at HK$5.10 to HK$5.40 each, according to a sales document obtained by fund managers. This is the first time China Comservice has visited the equity market since it started trading in Hong Kong in 2006. The sale consists of 90.9 per cent shares with the rest offered by the National Social Security Fund, the document shows. China International Capital Corp is the bookrunner. Cisco, which owns a 10.82 per cent stake in the company, teamed up with IBM Corp and Blackstone Group to subscribe up to a combined US$110 million worth of shares to avoid a dilution effect. Cisco and IBM have agreed not to sell their shares for six months after the completion of the deal. US private equity house Blackstone had signed a three-month lock-up agreement, market sources said. The proceeds will go towards asset acquisitions, capital expenditure and general operating purposes, according to the document. 'The deal was completed quickly as investors are bullish on China's 3G outlook,' a source said. The sale is likely to be the largest primary share placement in Hong Kong since the beginning of the year. The Hong Kong market bottomed out from a low of 20,500 points and rose 2.74 per cent yesterday to close at 23,285.95 points. The timing of the placement matches the launch of 3G mobile-telephone service on the mainland. The government yesterday confirmed it was starting its long-waited 3G service by adapting its homegrown TD-SCDMA technology on April 1. China Comservice is the largest company providing specialised support services to telecommunications operators, not only in the country but also globally. It is also believed to be the biggest beneficiary of the launch of 3G service on the mainland. Analysts said the firm would also benefit from the proposed industry restructuring. 'Given its size and limited competition, the firm could easily win contracts for large-scale nationwide telecommunications networks or projects managed by new merged entities,' one analyst said. China Comservice shares rose 6.63 per cent to HK$5.63 before they were suspended in the afternoon yesterday.
