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ROUNDUP China Unicom acquires Netcom, sells CDMA assets as telco reorg takes off
06.02.08, 8:53 AM ET



HONG KONG (XFN-ASIA) - Wireless telecom provider China Unicom Ltd announced the takeover of fixed-line operator China Netcom Group Corp in a 439.17 bln hkd transaction and struck a separate deal to unload its CDMA mobile phone operations as the mainland's much-anticipated telecom industry restructuring got under way.

Separately, China Telecom Corp Ltd (nyse: CHA - news - people ) said it and its parent will acquire Unicom's CDMA business and network for a total of 110 bln yuan.

The series of transactions will transform both Unicom and China Telecom into fully integrated telecommunications operators, just like wireless leader China Mobile (nyse: CHL - news - people ) which earlier announced plans to absorb small fixed-line operator China Tietong Telecommunications Corp.

An analyst said that while the changes are designed to level the telecom playing field, it will take considerable time and resources before China Unicom (nyse: CHU - news - people ) and China Telecom are able to pose a credible threat to China Mobile's wireless dominance.

'While Unicom and China Telecom are consolidating their respective acquisitions over the next six months to one year, I expect China Mobile to use all ways and means at its disposal to launch a more aggressive expansion to try and grab as much additional market share as possible,' said Vicky Lin, an analyst at CSC Securities (Hong Kong).

Unicom is currently a distant second to China Mobile in the wireless stakes.

Officials of Unicom said the sale of its business based on CDMA mobile technology will enhance its competitiveness and give it a more distinct strategic positioning.

The company sold off its CDMA wireless business for 43.8 bln yuan and its CDMA wireless network for 66.2 bln yuan.

Unicom said it will use the sales proceeds to expand its its mobile phone business based on GSM technology. It will also use the funds to roll out more advanced third-generation (3G) mobile technology once licences are issued and to reduce debt.

It currently operates its CDMA mobile business on an exclusive basis in 31 provinces, municipalities and autonomous regions in China.

At the end of 2007, it had 41.927 mln CDMA subscribers, of which 38.62 mln were contract subscribers and the rest pre-paid users.

Unicom said in a statement that its acquisition of Netcom will enable the group to achieve synergies in at least six areas, 'allowing it to provide a full spectrum and multi-tiered suite of wireless, fixed, broadband and data value added services to its subscribers.'

Unicom officials said the takeover of Netcom does not include it's parent's 20 pct stake in Hong Kong fixed-line, broadband and internet TV player PCCW Ltd.

Companies involved in the ongoing restructuring are those listed on the Hong Kong bourse, not their respective mainland parents.

Under terms of the acquisition, Unicom will issue 1.508 new shares for each existing share of Netcom.

Unicom chairman and chief executive Chang Xiaobing said the estimated value of Netcom's acquisition is based on Unicom's last quoted price of 18.48 hkd per share before its shares were suspended on May 23.

Meanwhile, China Telecom said its acquisition of Unicom's CDMA business and network will enable the group to improve its core competitiveness as it offers a full range of services, including fixed-line, mobile, data and media.

'It will also provide the company with a solid foundation upon which to build and develop the next generation mobile business and service, thereby meeting the demands of the market . . .,' it said in an announcement.

(1 usd = 7.0 yuan)

jun.concepcion@xfn.com

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