China Unicom to choose partners

HONG KONG, China -- China's second-ranked mobile operator, China Unicom, is close to closing a strategic partnership with an international partner.

The state-run People's Daily newspaper quotes China Unicom executive director Yang Xianzu as saying at the weekend that the company's board of directors would hold a meeting next Monday to discuss inviting strategic partners.

China Unicom, which has a Hong Kong-listed division, has long flagged its plan to set up strategic ties with international telecoms players, with Japan's NTT DoCoMo and Deutsche Telekom among the front-runners.

U.S.-based AT&T Wireless, which is part owned by DoCoMo, is also a possible partner.

At least two partners

At least two international telecommunications industry players would be selected, Yang was quoted by the People's Daily as saying after a conference in Beijing,

While refusing to name which companies were in contention for a deal, Yang was reported saying one partner would have expertise in the mobile business and the other would have international direct dial operations.

China Unicom has been under increasing pressure to forge strategic partnerships since larger rival China Mobile sold $2.5 billion worth of shares to Vodafone AirTouch, the world's largest mobile player. "We think it would be extremely positive for Unicom to get a strategic partner, mostly because it would help them to complete the capital raisings they will need to expand," says HSBC Securities analyst Collin McCallum.

Partners needed for capital raisings

"They need enough cash to undertake the required capital expenditure, but more so to go out and make acquisitions and do further deals. To do that they'll probably need to issue stock, and having a strategic partner to soak up the demand would be extremely useful."

"Also, they're a new player to the market, relatively speaking, and their management is fairly unproven, so securing a partner would help to prove they can execute deals," says McCallum.

The People's Daily reports Yang saying that China Unicom aims to inject all 18 remaining provincial mobile networks into its Hong Kong-listed entity this year.

By last month China Unicom had 20 million mobile subscribers, of which about six million used the parent company's provincial networks.

Further capital expenditure

With the deterioration of global telecoms valuations, analysts expected China Unicom to pay less than US$1,000 per subscriber for the parent's 18 remaining networks, costing about US$5 billion.

Analysts expected the injection to improve China Unicom's valuation by about 5 per cent.

"The injection would allow the listed company, which now operates in 12 provinces, to cover the entire China mobile market," said the paper.

Yang gave no details on the injection timing or valuation, the People's Daily said.

Reuters contributed to this report.

China Unicom profile

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