China Telecom plans U.S., HK IPO


China Telecom's fixed line monopoly ended earlier this year

Ravi Hiranand and wire reports

HONG KONG, China -- China Telecom, China's dominant fixed-line telephone company, has applied to list on the U.S. and Hong Kong stock markets.

Pending approval from market regulators, the company plans to market the IPO in late September, followed by the stock's trading debut in October.

This would give Western investors their first crack at the burgeoning Chinese fixed-line phone market in the thriving southern and eastern provinces of the country.

Reports put the value of the IPO at between $3 billion and $4 billion, which Dealogic says makes it the fourth largest Asian IPO of all time.

China Telecom's plans come almost two weeks after another state-controlled company, Bank of China, earned $2.8 billion on its trading debut in Hong Kong. (full story)

The company has not yet officially announced plans to list, and couldn't be reached for comment by CNN.

Fewer buyers on the market

Analysts have warned that with the current volatility in the markets, China Telecom may find itself in a market with fewer buyers.

"It's not the best time to list if you're looking for the most money," Joe Locke, Asia telecoms analyst at ABN Amro told CNN. "But you can always list if you drop the price."

However, he added "Growth has slowed to the point where they don't need as much money as they would 2-3 years ago."

China Telecom has been working on the IPO for almost two years.

Locke said that although raising funds was a central objective of the IPO, it's not the only one.

"It's part of a drive by the Government to privatize their assets, to make them accountable and answer to the public," noting that it mirrored their objectives with listing the Bank of China.

The company's willingness to proceed despite the market conditions is also seen as part of China's determination to boost foreign investment and use it to stimulate competition.

Telecom split not even

Earlier this year, the government broke up China Telecom's monopoly by splitting the company into two and creating the company's main opposition, China Netcom, which controls the northern part of the country.

It was not an even split, and the new China Telecom has 70 percent of the fixed-line market -- but also has to cover poorly-developed regions like Tibet. (full story)

Analysts suggested to Reuters that some of those regional divisions may be in the red, as Telecom has never published detailed financial information.

The government has also said that it will grant both companies mobile licenses, allowing them to compete with the country's two leading mobile operators, China Mobile and China Unicom

Both are listed on the HK stock exchange, and Locke said that Telecom's listing would have an effect on the mobile firms, noting that it wasn't big enough for them to co-exist without having a knock-on effect on each other.