China Network Communications Group Corp (China Netcom), the country's second-largest fixed-line operator, officially triggered its initial public offering (IPO) yesterday in Hong Kong, blowing its own horn towards the capital market.

According to China Netcom's prospectus, it is selling a total of 1.046 billion shares, of which 104.6 million shares will be issued in Hong Kong. Price for each share was set at an indicative range of HK$7.8-8.91.

Netcom's offering has been more than 2.5 times covered - almost a week before the offering is set to conclude next Tuesday (November 9), sources close to the deal said.

And the shares are set to begin trading in New York on November 16 and November 17 in Hong Kong.

This is the largest telecom issue this year in Asia with Goldman Sachs, Citigroup and China International Capital Corp (CICC) underwriting the deal.

China Netcom promises to pay 35 to 40 percent of its earnings in 2004 and 2005 as dividends, quite a high level compared to China Telecom's 22 percent.

"About 50 percent of the raised funds will be used to expand and upgrade existing telecom network infrastructure to enhance our competitiveness," said Zhang Chunjiang, board chairman of China Netcom.

About 30 percent of the funds will be used to pay back bank loans and 10 percent used to develop new applications and services such as IP-based telecommunications application services and voice value-added services, he said.

The first batch to be listed will include assets from the company's subsidiaries including Beijing, Tianjin, Shandong, Hebei, Henan, Liaoning, Shanghai, Guangdong, Netcom International and Asian Netcom.

"We have no plan to invest in the development of third generation (3G) of mobile communications now as there are still a lot of uncertainties regarding 3G," Zhang said.

Only when related issues such as 3G licenses, timetables and standards are made clear will the company think about it, he said.

He also said that no agreement has been reached so far for negotiations with PCCW Ltd to purchase the company's phone business. PCCW Ltd is the largest communications provider in Hong Kong.

(China Daily November 5, 2004)