TRANSCRIPT:
Hot Summer for Shanghai! Big New IPOs and Changes
in the Telecom Industry:
Sinomania! Volume I Episode 22, June 27, 2007
A $10 billion dollar IPO? Looks to be a hot summer
in Shanghai!
Mergers and acquisitions in China’s telecom industry:
Is the long anticipated consolidation here?
Market Recap
The Shanghai Composite inched its way back up
past 4,000 after dipping below that mark at the
beginning of the week. The same applies for the
CSI 300 index which is again above 4,000 and closed
June 28 at 4,040.484. Foreign investors remain
jittery on B shares as both Shanghai and Shenzhen
B share indexes are down to levels last seen at
the start of May.
Big news of the week was the blockbuster IPO
of COSCO (China Ocean Shipping Company) holdings
domestic listing on Shanghai. COSCO
is a state-controlled giant that is the fifth
largest container shipping line in the world and
is listed already on Hong Kong as an H share.
COSCO’s Shanghai IPO was over subscribed 106 times
and its shares have doubled in value since trading
began on June 26 showing the bullish sentiment
of Chinese investors for the high-profile state
asset. The company plans to use its new funds
to buy a fleet of dry bulk carriers and eventually
expand into oil tankers. Already the biggest container
cargo fleet in Asia, COSCO is one to watch as
it could someday challenge the European majors.
IPO REPORT
Speaking of big IPOs, it looks to be a long hot
summer in Shanghai as Chinese regulators are encouraging
the big Hong Kong Red Chip firms to list locally
and Chinese companies are still going overseas
as well, despite persistent rumors to the contrary.
One such Red Chip, Hong Kong listed China
Mobile, the world’s biggest mobile phone company
on pace to have half a billion subscribers by
2008, is on for a giant IPO listing on the Shanghai
exchange as soon as July although there is no
firm timetable. Interest is so high for investing
in China Mobile that expectations are the IPO
could rake in $10 billion US dollars. I’ve got
more on the telecom industry later in the show.
Fosun International,
a Shanghai based conglomerate with investments
in steel, retail, property, and other areas, has
been called the Chinese “Blackstone Group,” and
is planning an IPO on Hong Kong to raise up to
one and a half billion US dollars. The money raised
will be used to fund acquisitions in its core
investment segments and repay debt. Core investors
already include Li Kai-shing, Hong Kong’s richest
man, and the Government of Singapore investment
company. Fosun is majority owned by Chinese billionaire
Guo Guangchang who co-founded the company.
And here’s a chance to invest in China’s movie
business -- the Huayi Brothers Group, a media
company with operations in television, music,
advertising, and film, is planning an IPO outside
China sometime next year. The company produced
four of the top 10 grossing domestic movies in
China last year. Wang Zhongjun, the elder brother
that co-founded the company will remain in control
of 70 percent of the company’s shares. Huayi Brothers
already received around $32 million in series
b and c venture capital funding. The IPO is planned
for 2008 on an as yet unnamed overseas exchange.
No other details at this time.
The Huayi Brothers films range from historical
epics to action flicks (with Jackie Chan, of course)
but also smaller pics relevant to modern Chinese
society today. The movies have little exposure
outside China which, I’m told, is a pity as they
are among the best movies coming out of China
now. For most Americans, in particular, Chinese
movies still mean the films of the Xi’An school,
such as Farewell My Concubine, Raise the Red Lantern,
To Live, and others, all beautiful films in the
grand tradition of early cinema but the Huayi
Brothers productions are a new step toward a style
of more popular but still profound movies. It
will be interesting to see if their IPO next year
helps them gain a wider audience.
TELECOMS
After two years of speculation, China Unicom
will indeed be split with its CDMA mobile network
going to China
Telecom and its GSM mobile network going to
China
Netcom, the two heretofore fixed-line only
telecommunications companies in China’s southern
and northern regions respectively.
China Unicom is the smaller of China’s two mobile
companies, dwarfed by industry giant China Mobile.
With the addition of mobile phones, China Telecom
and China Netcom should open up the mobile phone
business in China and eventually lead to the emergence
of a true global competitor.
At the last National People’s Congress, Prime
Minister Wen Jiabao accused the telecom sector
of “monopolistic tendencies” and many insiders
say that the restructuring needed in the industry
is delaying the adoption of 3 G technologies in
China.
How the consolidation of the telecom industry
plays out will be important to watch as it will
give clues to future restructuring in other Chinese
industries, notably steel and automobiles.
