China Unicom to buy 9 GSM networks for HK$3.2b ( 2003-11-21 14:35) (Agencies)
China's No. 2 mobile phone company, China Unicom Ltd., said it will buy nine
remaining provincial networks from its parent for HK$3.02 billion (US$387.18m),
using its own cash to fund the acquisition.
Unicom said in a statement that the nine networks it will buy from parent
China United Telecommunications Corp., carry net debt of HK$7.6b. The combined
purchase price, including cash and debt, totals HK$10.6b (US$1.36b).
In a complex set of related transactions, China Unicom Ltd. said its
subsidiary, CUCL, had agreed to sell its Guoxin nationwide paging business to
China Unicom's "A Share" publicly traded company, for HK$2.59 billion
(US$332.05m).
The provincial networks deal would give Unicom a network spanning 30
provinces in the world's biggest telecommunications market based on the GSM
wireless phone standard popular in Europe. The additional provinces are mostly
located in western and northern China, less wealthy areas than its eastern
coastal base.
The company's chief rival, China Mobile (Hong Kong) Ltd., the world's largest
carrier based on subscribers, also operates a separate network based on the same
standard.
Analysts had estimated Unicom would pay 11-13 billion yuan (US$1.33b
US$1.57b) for the GSM networks, which would include a discount to their actual
value.
The total purchase price of the nine provincial networks represents a
multiple of about 12.8 times the forecasted net profit of HK$234 million for the
year ending in December.
The proceeds of the paging company sale will go to the general working
capital of the Unicom Group and Guoxin will become a wholly owned unit of the A
Share company, Unicom said.
Unicom previously said it was in talks to buy the nine networks from its
parent in the latest of a series of deals by Chinese carriers to expand by
buying assets from their parent companies.
Such purchases have been typical of former state-owned Chinese firms that
have made public offerings with their best assets first, then slowly injected
additional assets into the listed company over time.
Last week China's State Asset Regulatory Commission said it expected Unicom
to complete the nine-province acquisition by year-end.
Unicom also operates a newer network based on the CDMA standard backed by
U.S.-based Qualcomm Corp..
U.S.-listed shares of China Unicom traded 14 cents lower to $8.75 in New York
Stock Exchange trading.
