The restructuring of China’s telecoms market has taken another step forward this morning with confirmation that China Unicom has settled on the financial terms of its merger with fixed-line player China Netcom and the sale of its CDMA business to China Telecom. China Unicom is merging with China Netcom in a share swap valued at US$56.3 billion, based on Unicom’s stock last-traded price. Although officially being termed a ‘merger,’ China Netcom will be delisted and will become a wholly-owned unit of China Unicom. Meanwhile, China Unicom will receive 110 billion yuan (US$15.9 billion) for the sale of its CDMA operations.
Analysts have reportedly questioned the price of both deals. The merger with China Netcom is almost twice the company’s market value, but in a statement China Unicom gave no explanation for the high price. Similarly, the price tag for China Unicom’s CDMA business is noted in a Reuters report as being high as it is only a third of the size of its GSM business (which China Unicom will retain) and, according to Reuters, only broke even in 2006 after years of losses. According to the report, China Telecom’s parent company will pay 66.2 billion yuan for the business, while its listed unit will fund the remaining 43.8 billion yuan. The deal will mark China Telecom’s first entry into the Chinese mobile market. Shares in China Unicom, Netcom and Telecom have been suspended since 23 May, following the announcement of the restructuring plan, which will also see mobile market-leader China Mobile acquire China Railcom, a small fixed-line player. Trading is expected to resume tomorrow.
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