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.

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