It’s a busy time, financially, for China Unicom. China’s second largest mobile operator has announced the completion of an issue of US$1 billion in convertible bonds to South Korea’s SK Telecom. Separately, Unicom is also mulling the sale of over US$750 million in commercial paper.
In June, South Korea’s top mobile carrier agreed to buy the bonds which can be converted into a 6.67 percent stake in Unicom in a year. The stake is much lower than the minimum 10 percent holding that SK Telecom had initially sought.
Meanwhile, a leading regional daily has said that Unicom is also on the verge of selling US$750.7 million (6 billion yuan) of commercial paper. The funds will be used as working capital.
According to the South China Morning Post, Unicom will sell 2 billion yuan of commercial paper that will mature in six months. Another 2 billion yuan worth of notes will be due in nine months and a third lot of 2 billion yuan will mature in one year.
The Unicom share is expected to give SK Telecom entry into the fast-expanding Chinese market. It is the largest mobile phone market in the world in terms of subscribers. China has more than 421 million mobile phone subscribers and the number is slated to rise to at least 600 million within the next three years.
SK Telecom is hoping the partnership will help it take advantage of the opening up of China's telecom market after the country joined the World Trade Organization.
“The Chinese mobile market has great potential both in quality and quantity,” Shin-bae Kim, chief executive officer of SK Telecom, said in June in a press release. “With this partnership we look forward to making significant developments in the CDMA business of China Unicom.”
Unicom and SK Telecom have also signed a strategic alliance framework agreement under which they will cooperate in areas such as CDMA, handsets, VAS platform, marketing, IT infrastructure and network businesses.
The tie-up is expected to give a performance boost to Unicom’s loss-making CDMA network, which has over 35 million subscribers.
“We believe that the strategic alliance will facilitate the company’s future development, enable the company to provide better services to its CDMA subscribers and create greater shareholder value,” Chang Xiaobing, chairman of China Unicom, had said in the press release.
SK Telecom is South Korea’s number one mobile phone manufacturer. The firm was incorporated in March 1984. It provides cellular services, wireless Internet services, and online Internet and Internet access via CDMA networks. Through its subsidiary, SK Teletech, it also designs, markets and sells digital handsets under the brand name Sky. The company provides international calling services, multimedia services and a telematic service called NATE Drive, which offers drivers with real-time location and traffic information.
China Unicom is organized into four business segments based on the various types of telecommunications services it provides: GSM business; CDMA business; data and Internet business, and long distance business. It operates in 30 provinces in China.
For details on SK Telecom and China Unicom, go to
www.sktelecom.com and
www.chinaunicom.com.hk/.
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Kumar Amitav Chaliha is a contributing editor for TMCnet. To see more of his articles, visit his columnist page.