Daily Management Review

$12 Billion To Be Invested In State-Owned China Unicom By Baidu, JD.Com And Others: Reuters


07/23/2017




$12 Billion To Be Invested In State-Owned China Unicom By Baidu, JD.Com And Others: Reuters
In order to jointly invest about $12 billion in the Shanghai-listed unit of China Unicom, the weakest of three big state-owned telecoms firms, Baidu Inc and JD.com will join other big Chinese technology firms, reported Reuters citing information from two people with direct knowledge of the matter.
 
The Chinese government has undertaken a drive to rejuvenate state behemoths with private capital and the move is part of that drive. To a first batch of state-owned enterprises to see mixed-ownership reform, Beijing added China Unicom last year.
 
While its recent earnings have struggled in a fiercely competitive market, and one of the world's largest mobile carriers by user numbers, is China Unicom, formally known as China United Network Communications Group Co Ltd.
 
Over-staffed, inefficient and slow to develop key technologies are the main ailments of the carrier. While private firms have moved ahead in developing cloud and big data services, and mobile software, it already lags state-owned China Mobile and China Telecom.
 
Among new investors putting a total of about $10 billion into China United Network Communications Ltd, China Unicom's Shanghai-listed unit would be Alibaba Group Holdings and Tencent Holdings, Reuters had reported last month.
  
With JD.com, the country's second-largest e-commerce company, putting in about 5 billion yuan and Baidu, China's biggest internet search provider, investing about 10 billion yuan ($1.48 billion), that total is likely to rise to about 80 billion yuan ($11.8 billion), according to Reuters.
 
While China Life Investment Holding Co Ltd would be the biggest new investor, with a 20 billion yuan commitment, the China Unicom unit is likely to raise 15 billion yuan from Tencent and 7 billion yuan from Alibaba, the news agency said.
 
According to Thomson Reuters data, since insurer AIA Group's 2010 initial public offering, it would be the largest capital raising in the Asia-Pacific region.
 
Sources said that while China Unicom would also sell part of its stake in the Shanghai unit, the majority of the capital would be raised through new share issues.
 
China Unicom, Alibaba and Tencent didn't respond to Reuters requests for comment while Baidu and JD.com declined to comment.
 
Sources also said that from 63 percent currently, China Unicom's stake in the Shanghai-listed business would fall to just above 40 percent, after the share sale. And in order to engage in its operations and improve its management, top investors, including China Life Investment and Tencent, would likely have seats on the firm's board.
 
By lowering the cost of attracting new users and shifting its focus from traditional telecoms services to digital information services, teaming up with China's big tech companies, particularly Tencent and Alibaba, would help revive China Unicom.
 
Bringing a significant speed upgrade from today's 4G network, Beijing is pushing to build the world's largest fifth-generation (5G) mobile network and the share sale also comes at such a time.
 
According to a recent research paper from the Ministry of Industry and Information Technology, China's 5G market could be worth 1.1 trillion yuan, or 3.2 percent of GDP, by 2025.
 
The firepower to boost its spending on 5G would be given to China Unicom by the capital raising.
 
(Source:www.reuters.com) 






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