China Unicom to acquire Netcom as part of telecom overhaul

Separately, China Telecom, the country’s biggest fixed-line operator, and its parent will buy the code division multiple access, or CDMA, network and accompanying business from China Unicom companies for 110 billion Yuan ($15.86 billion).   Â

 

The moves are part of a government-mandated restructuring of Chinas telecommunications sector unveiled late last month. That plan called for the country’s six telecommunications companies to merge into three groups in a bid to create a more competitive telecommunications industry and prevent a dominant operator from monopolizing the market.

 

Under the transactions unveiled Monday, each existing China Netcom share will be swapped for 1.508 new China Unicom shares. The total value of the deal is based on China Unicom’s and China Netcom’s May 23 share price of HK$18.48 and HK$27.05 respectively.

 

China Unicom Chairman Chang Xiaobing said at a press conference the company expects the deal to close by the end of 2008.

 

In a separate statement to the Hong Kong stock exchange, China Telecom said its parent, China Telecommunications Corp., will acquire the CDMA network from China United Telecommunications Corp. for 66.2 billion Yuan and will buy China Unicom’s CDMA operations for 43.8 billion Yuan. The CDMA technology is popular in the U.S. and Asia.

 

China Telecom said the move will allow the company to branch out into the mobile business.

 

"It will provide the company with a solid foundation upon which to build and develop the next generation mobile business and service," it said.

 

China Unicom is the only CDMA service provider in China, with 42 million subscribers by the end of 2007.

 

The CDMA business posted a pretax profit of 1.2 billion Yuan ($173.4 million) for 2007 and 240 million Yuan ($34.7 million) for the three months ended March.

 

Shares in China Unicom, China Telecom and China Netcom had been suspended from trade since May 23 pending "price-sensitive" announcements.
The three companies said Monday that trading will resume Tuesday.