NEW YORK-China Telecom (Hong Kong) Ltd., the major cellular carrier in the populous Guangdong and Zhejiang provinces, priced its initial public stock offering at HK$11.80 per share Oct. 16, Goldman Sachs & Co., lead underwriter, said. A Hong Kong dollar is worth approximately 0.13 United States dollars.
The share price set is the largest such transaction by a Chinese entity to date and was significantly below earlier price talk, which reached as high as HK$26. However, the IPO also was oversubscribed by 20-30 times relative to the number of shares available for sale.
“There was some price sensitivity,” a Goldman Sachs spokesman said, adding that the investment bank was, “gratified with the result” of the IPO given current market conditions.
China Telecom, which is part of the Chinese government’s Ministry of Posts and Telecommunications, will issue a total of 2.6 billion shares when its stock begins trading this week. The Chinese government will retain 75-percent control of China Telecom.
Of the shares being sold, 1.8 billion are earmarked for sale to 12 strategic corporate investors in Asia, including nine in Hong Kong. There are 278 million shares set aside for public sale in the United States and 370 million shares for public sale internationally.
To sweeten the deal, Wu Jichuan, minister of Posts and Telecommunications, said Oct. 16 that the ministry would give preferential treatment to China Telecom by allowing its cellular operations in Guangdong and Zhejiang provinces to boost profitability by counting network and value-added fees as part of their revenues. The ministry also will allow these two mobile telephone businesses to write off depreciation charges for seven years instead of the standard 10 years, Wu said.
“This listing of China Telecom will be the first course of a big banquet, and bigger courses will be served later,” Wu said, according to the South China Morning Post.
Meanwhile, the day before the IPO price was set, London-based Cable and Wireless P.L.C., announced it had appointed its chief executive, Richard H. Brown, chairman of Hong Kong Telecommunications Ltd. China Telecom’s parent company, China Telecom (Hong Kong) Group, which the China Ministry of Posts and Telecommunications owns, also owns a 5.5 percent stake in Hongkong Telecom.
Additionally, Cable and Wireless said it had appointed Li Ping, chief operating officer of China Telecom, executive director of Hongkong Telecom.
The flotation of China Telecom stock isn’t designed for telecommunications company participation, Brown said. He said the IPO is intended primarily as, “an opportunity to raise capital by providing large numbers of investors” in China Telecom’s two cellular businesses.
