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IPO

IPO

China Tower could list sooner to capitalise on rise in telecom operators’ share prices

Infrastructure-sharing joint venture between China Mobile, China Unicom and China Telecom expected to see a higher valuation from an IPO this year

PUBLISHED : Wednesday, 11 October, 2017, 5:37pm
UPDATED : Wednesday, 11 October, 2017, 10:59pm

China Tower, the state-backed company that controls the world’s largest network of telecommunications towers, could have its initial public offering brought forward to this year amid the rising share prices of key industry players.

“If they can get this done soon, China Tower would be able to take advantage of the current bull market and probably obtain a higher valuation than the recently suggested amount of U$10 billion,” Edison Lee, an equity analyst at investment bank Jefferies, told the South China Morning Post on Wednesday.

“We interpret the recent share price strength as an indication that the market believes China Tower’s IPO is near.”

The listing of China Tower was initially expected to happen in the first quarter next year, based on information from China’s three telecommunications giants. The company was established as an infrastructure-sharing joint venture by network operators China Mobile, China Unicom and China Telecom in 2014, taking responsibility for the construction, maintenance and operations of their wireless communications towers and auxiliary infrastructure across the mainland.

Lee said China Telecom’s shares were approaching an 18-month high, while those of Unicom are on the rise.

“Nobody knows when there will be another bull run in this sector, so the China Tower IPO could be closer than we thought,” he said.

“At our estimated 235 billion yuan (US$35.6 billion) valuation of China Tower, the stakes of China Telecom and Unicom would each be worth 23 per cent of their existing market cap.”

In 2015, the network operators agreed to sell and transfer assets worth a combined 214 billion yuan to the joint venture. China Mobile, which has the most number of towers on the mainland, contributed 116.4 billion yuan in assets for a 38 per cent share in China Tower.

Unicom, China Telecom and the state asset-management firm China Reform Holding own 28.1 per cent, 27.9 per cent and 6 per cent, respectively.

On Wednesday, China Telecom’s share price was down 2.4 per cent to HK$4.10 at the close of trade, while Unicom’s advanced 0.7 per cent to HK$11.20.

China Mobile, the world’s biggest wireless network operator with 873.7 million subscribers as of August 31, saw its share price slip 0.7 per cent to HK$78.45.

China International Capital and Goldman Sachs were reportedly selected by China Tower in August to lead a planned Hong Kong IPO worth about US$10 billion. The deal could see other banks being included in the final public listing sponsor team, according to Reuters.

“It makes sense to have a listing in the city so that China Tower can have a strong local research following, as well as to enable mainland investors to buy shares via the Shanghai-Hong Kong and Shenzhen-Hong Kong stock connect securities trading programmes,” said Jefferies’ Lee.