Telecoms Market to Resist Shake-up After Overseas Listing

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Last updated at: (Beijing Time) Tuesday, August 06, 2002

Telecoms Market to Resist Shake-up After Overseas Listing

The long-anticipated overseas listing of China Telecom is unlikely to dramatically change the competitive landscape in the domestic telecoms industry in the short run, analysts said.

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The long-anticipated overseas listing of China Telecom is unlikely to dramatically change the competitive landscape in the domestic telecoms industry in the short run, analysts said.

The listing plan was delayed for two years but it is not expected to spark a sudden shake-up of the sector as foreign investors are expected to be denied controlling shares and management rights.

"The planned overseas stock offering of China Telecom will not have a big impact on the domestic market competition environment," said telecoms analyst Shi Wei, who is also a senior research fellow with State Council Office for Restructuring the Economic System.

It was revealed last week that the fixed-line phone giant is expected to file documents with the US Securities and Exchange Commission this week for a massive initial public offering (IPO), aiming to raise US$2.5 billion to US$3.5 billion from the capital market.

The company was not available for comment.

"The overseas listing will not bring about great changes to State-owned China Telecom's shareholding structure," Shi told Business Weekly.

Shi said the company should absorb private capital to enhance its competitiveness in both the domestic and global market as the private economy has become a major engine driving China's high economic growth.

Introducing private capital will be a catalyst for much-needed reforms of domestic telecoms carriers, he said.

Shi's remarks were echoed by another Beijing-based telecoms analyst, Han Deqiang.

"As foreign investors are not likely to be granted controlling shares and management rights, the listing will not exert a big influence on the domestic market," Han said.

The recent plunges of the US and Hong Kong stock markets have cast a shadow on China Telecom's listing plan. A series of scandals of accounting fraud unveiled in the United States have dragged stock indices to a historic low.

Although a market rally was staged last week, analysts widely believe the slump will continue for a time as investor confidence has yet to restored, in particular in the telecoms sector.

The amount China Telecom plans to raise is about half what was originally expected, according to Reuters. The company's overseas listing is more strategic than a financial action, said Jonathan Zhu, managing director and head of the telecoms team at Morgan Stanley.

As State-owned enterprises, China's telecoms carriers always suffer low efficiency and outdated management.

The overseas listing will bring modern management methods to China Telecom to upgrade its efficiency, Zhu said.

"In a sense, China Telecom is not in short of cash as it has accumulated huge windfalls during the monopoly age," researcher Han told Business Weekly.

China Telecom, once the sole provider of fixed-line phone services in China, was recently divided into two competitive operators in a government-ordered restructuring arrangement: China Netcom in the north and China Telecom in the south.

Business Weekly contributes to this report

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