China Unicom raises fund for expansion By Yu Chen (China Daily) Updated: 2004-07-22 10:10
China United Telecommunications Corp Ltd, the listing arm of China Unicom
Corp in the domestic A share market pledged yesterday that the massive 4.5
billion yuan (US$542) it raised through share placements would fuel its
expansion and further enhance its competitiveness.
The A share company announced yesterday that 89 per cent of its 1.5 billion
shares were purchased by tradable shareholders, with the remaining 11 per cent
being subscribed to by underwriters.
The share price was set at 3 yuan (36 US cents), with the purchase of the
share placements due on Tuesday.
This is the domestic market's biggest share placement this year in terms of
the amount of funds raised.
"We are very pleased with the subscription rate of close to 90 per cent,"
said Lao Jianhua, secretary of the A share company's board of directors.
Proceeds from the share placement will be used to purchase China Unicom BVI
Co Ltd shares from its parent company, according to Lao.
The parent firm will then plough all of the proceeds into the construction
and optimization of its CDMA (code division multiple access) networks in order
to enhance its competitiveness.
"The A share company has set a reasonable share price for subscription this
time given its stable performance," said Dai Chunrong, an analyst from China
Securities.
The A share company posted a net profit of 2.33 billion yuan (US$280
million), up 6.3 per cent from the previous year.
It reported revenues for its main businesses last year, which reached 59.8
billion yuan (US$7.2 billion), a year-on-year rise of 31.2 per cent.
Its 2003 pre-tax profits stood at 24.8 billion yuan (US$2.98 billion),
registered a year-on-year growth of 7.5 per cent.
"It partly reflected investors' confidence in its market performance this
year," she said.
But Dai said she would rather be "cautious" and would closely monitor the
company's performance, as it is exposed to intensified market competition such
as price wars and the slashing of telecommunications fees .
Analysts believe that China Unicom is facing great challenges as the telecom
market becomes increasingly market-oriented, although the firm may continue to
win government support to prevent China Mobile from having the overwhelming
advantage in the domestic market.
"We are confronted with tense competition in the market," said China Unicom
President Wang Jianzhou.
The company attracted industry attention as it celebrated its 10th
anniversary on July 19.
China Unicom is the only telecom operator in China that runs the two
different networks - GSM and CDMA.
The company had signed up more than 100 million mobile subscribers by the end
of last month, accounting for almost one-third of the domestic market share.
Analysts believe that dual-mode mobile phone services, which will be launched
either later this month or early next month, will be a key element in ensuring
the two networks' sustained development and make them increasingly
complementary.
With the "World Wind" brand name, the dual-mode mobile phone service
supporting both GSM and CDMA networks enables users to transfer from
automatically from one network to the other.
"We are very confident about the new service, as it enables our customers to
enjoy the services from both networks and provides a new communication
experience," Wang said.
"It is part of China Unicom's efforts to differentiate its services," Dai
said.
