NEW YORK-China Telecom (Hong Kong), which provides cellular service in three Chinese provinces, plans to raise $500 million in a global bond offering, according to Standard & Poor’s Corp.
The debt issue, a planned $1.65 billion stock sale and a $3.95 billion equity asset swap with the federal Ministry of Information Industry, its majority owner, will finance China Telecom’s planned acquisitions of cellular carriers in three additional provinces: Fujian, Hainan and Henan. Together, they had 3.4 million subscribers as of June 30.
China Telecom already provides cellular service to about 8.8 million subscribers in the Guangdong, Zhejiang and Jiangsu provinces, which are among the most economically developed regions in the country.
“With a good operating efficiency and a competent, forward-thinking management team, [China Telecom] is expected to remain the industry leader in coming years,” said S&P analysts Stella Shao of Hong Kong, John M. Bailey of Taipei and Richard Siderman of New York.
“With net income of … about $482 million for the first half of 1999, [China Telecom] has maintained a very strong financial profile since its inception, chiefly thanks to limited competition coupled with its competitive cost structure and strong profitability.”
Standard & Poor’s assigned a low-tier, investment-grade rating of BBB to the proposed bond issue.
“[China Telecom] is likely to continue to broaden its subscriber base by acquiring more cellular assets from the parent company,” the S&P analysts said.
“The regulatory environment should remain fairly orderly, and [China Telecom] is expected to pursue growth in a way that will preserve credit measures … adequate for the current rating.”
