Chinese Telecom Company Prepares For $1.5 Billion IPO

China Netcom, the country's second-largest telephone operator, plans to list its shares on markets in New York and Hong Kong.
SHANGHAI, China (AP) -- State-run China Netcom, the country's second largest fixed-line telephone operator, has applied to list its shares in New York and Hong Kong in an initial public offering expected to raise $1.5 billion, state media reported Wednesday.

The company, formally named China Network Communications Group Corp., filed applications with the U.S. Securities and Exchange Commission and with the Hong Kong Stock Exchange last week, the official newspaper China Daily reported.

Citing unnamed sources, the newspaper said the initial public offering was expected to take place in September.

China Netcom has networks in six provinces and cities in northern China, operations in Shanghai and Guangdong, a nationwide broadband business and an overseas network it bought last year from Asia Global Crossing.

The company plans to sell one-quarter of its share capital.

China Netcom was formed by a government restructuring of the former state phone monopoly that set up two competing corporations: China Netcom Group in the north and China Telecom in the south.

The company incorporated two small data-communications companies, China Netcom Corp. and Jitong Network Communications Co., and 10 provincial telephone networks formerly belonging to China Telecom.

China Netcom has assets worth 240 billion yuan ($29 billion), the China Daily said.

The independent newspaper Hong Kong Economic Times reported Tuesday that China Netcom plans to take a 23 billion yuan ($2.8 billion) writedown of its assets in order to list its shares at an attractively low price.

The company expects to report a net loss of 11 billion yuan ($1.3 billion) for this year, it said, citing banking sources it did not identify further.

The report said the huge writedown was apparently aimed at avoiding a repeat of the embarrassment that faced China Telecom when it failed in its first attempt to sell shares in 2002. The company slashed the value of its share offering by half, eventually raising $1.43 billion instead of the originally planned $3.7 billion.

Other major Chinese companies trading in New York include PetroChina, China Petroleum and Chemical Corp. or Sinopec, and offshore oil giant CNOOC. Several major Internet providers, such as Inc., Inc.and Inc., are listed on the Nasdaq Stock Market.

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