Photographer: Adam Dean/Bloomberg

Unicom Shares Rise in Shanghai and Hong Kong on $11.7 Billion Sale

  • China’s securities regulator says it will approve the deal
  • Wangsu Science, Eastone Century also rise on Unicom deal

Shares of Unicom Group’s key units in Shanghai and Hong Kong rose after China’s second-largest wireless carrier announced a $11.7 billion stock sale as part of a government push to draw private capital into its state-owned enterprises.

China United Network Communications Ltd., which has been suspended from trading since April, climbed by the 10 percent daily limit to 8.22 yuan in Shanghai on Monday. China Unicom (Hong Kong) Ltd. rose 3.5 percent higher to HK$12.36 in Hong Kong.

Unicom Group, formally called China United Network Communications Group Co., was among six SOEs picked by the nation’s economic planner last year for a pilot program in mixed-ownership -- China’s preferred term for such private investments. Shares of some SOEs rose last week amid optimism other state enterprises will follow Unicom in attracting private capital as part of the government’s broader push to overhaul a sector whose total revenue almost reached $7 trillion last year.

Yonyou Network Technology Co., Guangdong Eastone Century Technology Co. and Wangsu Science & Technology Co. were among companies that resumed trading Monday after they said they’re participating in the Unicom deal. Wangsu advanced 6.8 percent to close at 11.92 yuan, while Eastone Century surged by the 10 percent daily limit.

Though the Unicom deal will exceed the country’s limits on private share sales, the China Securities Regulatory Commission said it will waive the phone carrier from the restrictions as the transaction is significant to China’s efforts to reform its SOEs. Earlier this year, the securities regulator said private placements will be capped at 20 percent of existing shares and that prices will be determined on the day of issuance. Unicom’s share sale plan would have run afoul of the regulations if it weren’t for the waiver.

The Shanghai- and Hong Kong-traded companies are units of Unicom Group. Both the group and and China United are shareholders of the Hong Kong unit, which holds most of the operating assets.

China United said proceeds from the share sale will be used in the development of 4G and 5G technology, and will be injected into the Hong Kong-listed company through a share subscription.

Unicom Group isn’t alone in taking part in China’s experiment with privatization. In September, China’s National Development and Reform Commission also picked China Southern Power Grid Co., Harbin Electric Corp., China Nuclear Engineering Group Corp., China Eastern Air Holding Co. and China State Shipbuilding Corp. to take part in the pilot program. The idea of infusing private capital is meant to help bring in expertise needed to make state firms more efficient.

— With assistance by Jing Yang De Morel, Penny Peng, and Hannah Dormido

    Before it's here, it's on the Bloomberg Terminal.