China Network Communications Group Corp. (China Netcom), the country's second-largest fixed-line phone company, is likely to further postpone its initial public offering (IPO), insiders and industry experts say.

It is widely speculated that China Netcom is to float its IPO in the third quarter of this year.

"What investors are looking to is China Netcom's business performance instead of just business models," said an expert from the China Academy of Telecommunications Research under the Ministry of Information Industry (MII), who declined to be named.

"It is not the right timing for the company to get listed before the company has substantially improved its business performance," he told China Daily yesterday.

"Currently, there are not many selling points for China Netcom in comparison with other telecom operators such as China Telecom and China Mobile," he said.

So far, China Netcom has a total asset of 240 billion yuan (US$28.9 billion) with a 58 percent debt asset ratio.

On Wednesday, China Netcom was brought into the limelight as PCCW Ltd. announced that its negotiation to sell its phone business to China Netcom has yet to be reached.

"We are taking great care to work out a deal that will be good for both companies and good for Hong Kong," PCCW Group Managing Director Jack So said. PCCW Ltd. is the largest communications provider in Hong Kong.

PCCW in May said that it might sell a stake in its phone business, Hong Kong's largest, to China Netcom.

It is reported that China Netcom hopes to combine PCCW's Hong Kong network with its own network in southern Guangdong province before listing.

However, sources from China Netcom in Beijing said there is no confirmation if negotiations to buy PCCW's telephone network would be delayed or not.

"We have no idea about that so far as only few of our senior officials are involved in the issue," said an official with China Netcom, who insisted on anonymity.

Some analysts said the delayed purchase may postpone China Netcom's listing plan in September as it hopes to finish the purchase, which may help China Netcom to gain investors' confidence as PCCW is an international firm.

But Zeng Jianqiu, a professor with Beijing University of Post and Telecommunications, disagrees.

"The delay of the purchase will have almost no impact on the process for China Netcom's listing plan as the Hong Kong market is quite a tiny one compared to the Chinese mainland market," he said.

As far as the listing plan is concerned, factors such as self-evaluation, business performance, scale of subscribers, and international investment climate are the major concerns for the company, he said.

He also emphasized that though the global telecom investment environment is recovering, there are still uncertainties.

In January, China Netcom's General Manager Zhang Chunjiang said in an interview that its process of listing was shifting into high gear.

It is reported that China Netcom Group Corp. has designated three underwriters for its planned listing on the Hong Kong and New York stock markets and plans to sell as much as US$2 billion of stock to help upgrade networks.

(China Daily July 2, 2004)