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China: SK Telecom planning to acquire stake in China Unicom Print E-mail
Friday, 09 June 2006
South Korean mobile operator SK Telecom (SKT) intends to acquire 10% of China Unicom for about US$1.1 billion. SKT is hiring advisers to make the investment and the mandate is likely to be awarded soon.

“SK Telecom is looking to make a deal this year – they have 50 people looking at a very large investment into China,” said a banker in Seoul.

South Korean mobile operators have been seeking new revenue sources in their US$ 17 billion home market. They have been investing heavily in third generation networks in the hope that wireless data services – which now contribute about a quarter of SKT’s total revenue – will create a new market.

Analysts are sceptical about the investment in Unicom, saying that the company has an uncertain future and it is unlikely that SKT would have much say in any restructuring.

China Unicom’s revenues and profits are significantly lower than those of its rival China Mobile, and its shares have fallen by more than half since listing in Hong Kong in 1999. Unicom’s current market capitalisation is about US$ 11 billion.

Chang Xiaobing, China Unicom’s chair and chief executive, said that the operator was seeking a strategic partner to help develop its 3G mobile services. Analysts said Chinese telecom operators had large capital expenditure demands and still had to account for 3G, raising the prospect that investors such as SKT would be used to inject additional funds.

SKT would be following other telecom providers eager to enter the Chinese mobile market. Vodafone has 3.3% of China Mobile, the largest mobile operator, while Telefónica last year won approval from the Chinese government to double its stake in China Netcom, the second largest fixed-line operator, to 9.9%.

Source: Financial Times, Anna Fifield and Sundeep Tucker - WDR/Intelecon Regulatory News