China Unicom share sale to set the ball rolling for China’s state-owned firms

The 78 billion yuan (HK$91.5 billion) share sale by China United Network Communications Group, or China Unicom, the country’s second-largest mobile carrier by subscribers, marks the first step in the government’s efforts to rejuvenate State firms with private capital and create investment opportunities through mixed-ownership, say experts.

And judging by the response, the government could not have asked for anything better. It managed to line up 14 big shareholders to inject funds to the State-owned firm. Among those who queued up for the 35.2 per cent stake in Unicom, were industry bigwigs like Alibaba Group Holding, Tencent, Baidu, Suning and JD.com, five companies that have a combined market valuation of almost US$1 trillion between them. Alibaba owns the South China Morning Post.

Despite the brouhaha about the share sale and China’s successful launch of the mixed-ownership reforms, some analysts expressed doubts about the plan.

At issue is how the National Development and Reform Commission, China’s top planner, plans to execute the step-by-step restructuring of a phone company with more than 250,000 employees for the 21st century.

“This is yet another example of crossing the river by touching stones, and a comprehensive plan has not been set in stone yet,” says Aidan Yao, senior emerging Asia economist at AXA Investment Managers in Hong Kong. “Hence, the transparency is low. But as the reform reaches the implementation stage, more information will come forth. And as more companies are being reformed, a process will gradually formulate and become apparent to the market. Right now, they are probably only just dipping their feet in the water, and have not even started crossing the river yet.”

Meanwhile shares of China United Network Communications and its Hong Kong listed entity China Unicom, both surged by more than 10 per cent on Monday, as the group cleared the final regulatory hurdle for its restructuring plan.