China Unicom IPO Expects Keen Response

Enthusiasm for China Unicom's multi-billion-dollar offering is improving, helped by Hutchison Whampoa's strategic stake and recent telecoms deals in Europe.

China Unicom, China's second-largest integrated telecommunications provider, is offering 2.459 billion shares at HK$11.50 to HK$14.50 (US$1.47 to US$1.85) each.

The flotation, worth US$4.1 billion at the HK$13 (US$1.67) mid-point of the offering, is expected to be Asia's largest this year, and some fund managers say the deal may be priced at the top of the range.

Including an overallotment option of 368.87 million shares, the IPO could swell to US$5.26 billion.

Hutchison said last week it will buy US$400 million worth of China Unicom's shares in a deal that gives the Hong Kong conglomerate a major foothold in mainland's telecommunications market.

"Merger and acquisition activities have returned in Europe, which have lifted valuations of telcos, and with the investment of Hutchison, the IPO looks more attractive," said Patrick Chia, a director at Kingsway SW Fund Management in Hong Kong.

France Telecom SA clinched a ?5.1 billion (US$37.9 billion) cash and share deal to buy British mobile firm Orange on Tuesday.

NTT DoCoMo was also in talks to buy a 15-20 per cent stake in VoiceStream Wireless, in a deal worth 400-500 billion yen (US$3.7-4.62 billion), Japanese media reports said earlier this week.

Those deals reflected strong pricing, giving China Unicom's IPO price range room for upside, said Ambrose Chang, chief investment officer at Daiwa International Capital Management.

Trade in China Unicom shares is expected to start in New York, in the form of American Depositary Shares (ADS), on June 21, and in Hong Kong on June 22.

Analysts said they expected Hutchison's stake to enhance investors' confidence.

Hutchison, a blue-chip conglomerate, is investing heavily in telecommunications world-wide and controls about one-third of the Hong Kong mobile phone market.

At the mid-point of the pricing range, Hutchison's investment would give it about 2 per cent of China Unicom, which also is believed to be courting other strategic partners.

Market sources said the private placement portion of the China Unicom IPO - accounting for about 95 per cent of the issue - had basically been fully subscribed even though the retail public subscription in Hong Kong will not start until June 13.

"The ultimate subscription level will depend on the market's performance in the next two weeks but there is no doubt that the issue will be fully subscribed," Chia said.



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