China Unicom, China’s second largest telecommunications operator, on Friday priced its initial public offering close to the top end of its range, reflecting strong demand for a share that offers a play on the fast-growing cellular market in the Chinese mainland.
If the over-allotment option is exercised, Unicom could raise US$5.6bn. That would be the largest share offering from Asia excluding Japan and would surpass that of Unicom’s rival, China Telecom Hong Kong, which raised $4.2bn in 1997.
The institutional tranche of the offering is understood to have been about five times subscribed, while the retail offering in Hong Kong was more than three times subscribed. Nearly half of the demand came from US institutional investors and some 35 percent from institutions in Asia.
The IPO’s success bears testimony to investors’ continued love affair with cellular stocks. China’s red-hot cellular industry accounts for one in every seven new cellular subscribers worldwide. Unicom’s offering was also helped by the global re-rating of telecoms stocks in recent weeks as concerns abated about the high cost of third-generation (3G) mobile licences obtained through auctions, analysts said.
“Unicom’s pricing has been influenced by a re-rating of Vodafone AirTouch,” said one Hong Kong analyst. “Global cellular stocks became unsexy after the UK 3G licence auction.” The auction in April of five 3G licences in the UK raised L22.5bn ($34bn). Much higher than expected, it brought fears about the amount of money companies would need to spend to win licences.
The mainland telecom operator on Friday priced its shares at HK$15.42 for retail investors and at HK$15.58 for institutional investors, said Morgan Stanley Dean Witter Asia. MSDW is one of the lead managers for the share offer, which closed on Friday in Hong Kong. The shares will begin trading in New York on Wednesday, and in Hong Kong on Thursday. Reuters