not vested
China Unicom Soars: What Does “Mixed Ownership Reform” Mean?
By Shuli Ren
China Unicom (762.Hong Kong/CHU) soared 5.8% Tuesday in Hong Kong after the telecom posted an opaque filing with the Hong Kong Exchange that it has joined conversations in conducting “mixed-ownership reform”.
“Currently, Unicom Group is studying and discussing the mixed-ownership reform implementation plan. The selection of Unicom Group for the first batch of pilot-run on mixed-ownership reform has yet to obtain final approval,” according to the filing.
What does “mixed ownership reform” mean?
According to Jefferies‘ Elaine Lai, this notice means an often-rumored merger between China Unicom and China Telecom (728.Hong Kong/CHA) is not happening. Rather, China Unicom may invite strategic investors. Would Alibaba Group (BABA), Tencent Holdings (700.Hong Kong) or Baidu (BIDU) be interested? Lai ponders:
Foreign telecos are unlikely to be ideal candidates in the regulators’ eyes , as the telecom industry is, after all, strategic. Despite low economic returns, China has established a rather mature industry value chain; foreign telcos’ involvement would not add much value technologically.
In our view, one thing that Chinese telcos have missed in the last two decades is internet-related businesses, hence non-state owned companies like Baidu, Alibaba and Tencent have had a chance to become giants. If regulators were to introduce strategic investors into telcos, internet companies might be a probable choice.
Inviting strategic investors is a possibility, but it could be as non-event as employee stock options, notes Morgan Stanley‘s Gary Yu:
Another potential development could be management and employee ownership through stock-based compensation to improve incentives.
An extreme scenario could be a complete separation between network and operation, with mixed-ownership between the government and private companies in the operation entity to improve operational efficiency, leasing network from the state-owned network entity.
China’s three telecom operators already agreed to separate out their tower assets and combine them into China Tower, seen to go public sometime next year. See Goldman Sachs‘ recent upgrade: “Why Goldman Has Swapped China Mobile For China Unicom”
China Telecom rose 2.5% today. China Mobile is little changed.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... form-mean/