China Unicom implements mixed-ownership plan

Natalie Bannerman
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China Unicom set to become the first state-owned enterprise in China to roll out the mixed ownership reform, introducing Alibaba and Tencent as private sector stakeholders

In an industry, first the parent company of China Unicom has confirmed that it has been given permission to introduce private-sector stakeholders into the state-owned company.

The news comes as part of China United Network Communications’ mixed-ownership reform plan and has been green lit by the National Development and Reform Commission, the central planning agency in mainline China’s state council.

Chairman and chief executive at Unicom, Wang Xiaochu, said the proceeds to be raised will be used to further develop its infrastructure and push forward new businesses and online initiatives, such as cloud computing and the internet of things.

Alibaba and Tencent were both named as potential investors in a Reuters report last month, although this was reportedly denied by China Unicom. Reuters claims the investment could be as high as $10 billion into Unicom's parent company, around $7 billion of which would be generated by new shares.

“Unicom’s parent would be the first state owned enterprise to start undertaking this mixed-ownership reform scheme, while Alibaba and Tencent are expected to become the first domestic private-sector companies to get SOE board seats,” said Edison Lee, equity analyst at Jefferies, according to the South China Morning Post

China United Network aka China Unicom is one of eight state-owned enterprises participating in the pilot implementation of the government's mixed-ownership reform programme, although Lee noted that China Unicom will still need additional time to receive approval from other relevant bodies such as the Ministry of Industry and Information Technology, Assets Supervision and Administration Commission and the Shanghai Stock Exchange. This means the first phase of that reform plan will likely to be formally unveiled in four weeks, said Lee.

“We believe the potential positive surprise to the market will be that the private investors would own a larger stake in Unicom than the 15 per cent that was previously reported by the media,” Lee added. “A combination of debt and equity will also increase the amount of funds to be raised.”