China Netcom, the only unlisted company among China's four big telecoms operators, filed on Friday with the US Securities and Exchange Commission to raise as much as $1.5 billion in an initial public offering.
The Beijing-based company said it plans to sell 941.4 million common shares but did not say in a preliminary offering document how many common shares represent each American Depositary Share (ADS), which will be sold in the IPO.
The carrier has News Corp Ltd chief Rupert Murdoch and former Goldman Sachs president John Thornton as non-executive directors.
To improve its appeal, the company plans to pay 35 to 40 percent of its profit as dividends, giving it a dividend yield of about 4 percent, against the 2.6 percent yield of fixed-line market leader China Telecom Corp.
Asia's richest tycoon, Li Ka-shing, has said he plans to buy shares in China Netcom. But some fund managers said they were not interested in the IPO. "You should only buy the market leader in China's telecom sector," said Yang Liu, a fund manager at Atlantis Investment.
The estimated price of each ADS was not disclosed in the SEC document as it may be revealed in an amended document filed at a future date with the SEC. The company said it is seeking a New York Stock Exchange listing under the symbol "CN" for the ADSs and also plans to list shares on the Hong Kong stock market.
As part of the US offering, China Netcom will offer ADSs equivalent to 846.3 million common shares and shareholders plan to sell ADSs in the amount of 95.1 million common shares.
China Netcom said it plans to sell another 104.6 million common shares in Hong Kong, totalling more than 1 billion common shares in a global offering.
China International Capital Corp Ltd, Citigroup Global Markets Inc. and Goldman Sachs (Asia) LLC will underwrite the IPO, according to the prospectus.
Parent company China Network Communications Group Corp has created a Hong Kong vehicle for the listing that will own former monopoly networks in the cities of Beijing and Tianjing and the provinces of Shangdong, Hebei, Henan and Liaoning.
It will also include networks in Shanghai and Guangdong in the southern region, where it competes with China Telecom, and the former Asia Global Crossing, which provides international telecoms services in the region.
Eventually, the listed company is expected to buy its state-owned parent firm's remaining provincial networks, following the trend of other big Chinese companies that have listed a portion of their assets overseas.
The IPO will help the company pay for infrastructure. It plans to spend about $8.54 billion between 2004 and 2006 to expand its networks, sources have said. The underwriters will have the option to buy 156.9 million more shares from the company and shareholders to cover over-allotments, the company said in the SEC document.
The SEC document shows that for six months ended June 30 China Netcom revenues were $3.9 billion and profits from operations reached $1 billion.
China Netcom said in the SEC filing that it also plans to use the proceeds for debt repayment and development of new applications for data communications and voice services.
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