China Telecom sells debt, equity
By Yu Chen (China Daily)
Updated: 2004-03-03 08:44

In an effort to recruit more capital this year, China Telecom Corp Ltd, the country's largest fixed-line phone operator, filed on March 1 with the US Securities and Exchange Commission (SEC) to periodically sell about US$1 billion in debt and equity, company sources said.

In a registration statement with the SEC, China Telecom Ltd said it planned to offer debt securities and H shares, in the form of American Depository Shares (ADS), from time to time in one or several offerings.

Net proceeds from the sale will be used for general corporate purposes, including capital expenditures, working capital and acquisitions, China Telecom said.

In a telephone interview on March 2 with China Daily, China Telecom admitted to the plan, but refused to elaborate more on it.

"It's not the right time to comment on that," said an official with China Telecom Ltd.

Analysts believe the company's new move is to help it realize its goal of purchasing more new provincial phone networks from its parent company.

Sources close to the company said that the company started talking with its parent about the purchasing plan in February.

And the company is also keeping in touch with several investment banks about fund raising for purchasing, including Morgan Stanley, China International Capital Corporation and UBS Investment Bank.

It is has been reported that China Telecom plans to issue new shares to raise up to US$3 billion for purchasing telephone networks from its parent China Telecom Group Company.

The purchase may include the fixed-line network, data and Internet business of its parent.

China Telecom Ltd sources said the company is to spare no effortin purchasing more assets from its parent.

"We have been dedicated to that since we kicked off our IPO," he said in an early interview last month.

China Telecom shares had a slow start following the company's initial public offering in late 2002, but rallied strongly last year.

China Telecom Ltd made a similar purchase in October last year by acquiring six provincial networks from its parent for 46 billion yuan (US$5.56 billion), bringing its number of city and provincial networks to 10.

The company eventually plans to buy another remaining 11 networks still owned by its parent.

"With the recovery of the world telecom market, it is likely a right time for the application," said Dai Chunrong, an analyst from China Securities.

"Meanwhile, sustained domestic telecom development this year will also help boost investor confidence for the company's performance," she added.

According to Zhou Deqiang, general manager of China Telecom Group Company, the group's telecommunications revenue registered a growth of 8.1 per cent from the previous year.

Businesses related to broadband and Xiaolingtong, a wireless phone service, are the two major driving forces behind the growth.

According to Dai, China Telecom is undertaking the common practice of purchasing assets from its parent step by step to enhance its competitiveness, a trend found among other domestic telecom giants such as China Mobile and China Unicom.

Dai believes that purchasing new networks will help the listed telecom companies further widen their business regions and range as well as grab more market share from fierce domestic competition.