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>>> Chinese Telecom Giant Could Dial Up the Biggest IPO Since Alibaba


China Tower could raise up to $10 billion in Hong Kong offering

China Tower says it has nearly 1.9 million sites across mainland China and a national market share of 97% by sales.

China Tower says it has nearly 1.9 million sites across mainland China and a national market share of 97% by sales.


By Joanne Chiu

July 23, 2018


https://www.wsj.com/articles/chinese-telecom-giant-could-dial-up-the-biggest-ipo-since-alibaba-1532346165


The monopoly behind China’s vast network of cellphone towers started marketing what could be the world’s largest initial public offering in four years.

China Tower Corp. wants to raise up to $8.7 billion by selling a quarter of its shares in Hong Kong, according to a term sheet released on Monday. Including an option to sell 15% more stock if demand is strong, the deal could raise as much as $10 billion.

The company says it is the world’s largest telecoms tower provider by revenues and locations, with nearly 1.9 million sites across mainland China and a national market share of 97% by sales. It is raising funds to upgrade and expand its network, and repay debt.

A $10 billion deal would be the world’s largest IPO since Chinese e-commerce giant Alibaba Group Holding Ltd.’s $25 billion New York listing in September 2014.

The listing, which is aimed for Aug. 8, comes as global investors have turned more cautious on Chinese stocks as the trade conflict with the U.S. escalates. Hong Kong’s benchmark Hang Seng Index is down 15% this year from a January peak.

Towering Presence

China's telecom towers company is on course for 2018's biggest initial public offering.


?Sources: Dealogic, China Tower's term sheet?

*Estimated values for uncompleted deals

Note: ?Already listed IPOs include over-allotments.

China Tower* (Hong Kong)

Meituan Dianping* (Hong Kong)

Xiaomi (Hong Kong)

Siemens Healthineers (Frankfurt)

Foxconn Industrial Internet (Shanghai)


However, Steven Leung, an executive director at UOB Kay Hian, said China Tower could be a good way to bet on rapid growth in China’s mobile market. “Some investors might consider switching into China Tower, which is expected to provided higher yields than the Big Three wireless operators,” he said.

The company was created in 2014 by China’s three big telecommunications operators—China Mobile Communication Co., China United Network Communications Corp. and China Telecom Corp—who pooled their towers to cut costs and duplicated investments. The trio own most of its shares.

China Tower’s management told investors it plans to pay out at least half of its earnings as dividends. The company last year reported net profit of 1.94 billion yuan ($286.5 million).

Analysts at Goldman Sachs, one of the banks running the deal, estimate China Tower’s earnings before interest, taxes, depreciation and amortization will increase 11% a year through 2022, according to a report seen by The Wall Street Journal. Ebitda is a measure of profitability commonly used in industries like telecoms that require heavy investment.

Hong Kong recently changed its rules to attract more listings from technology and biotech startups, securing the $4.7 billion debut of smartphone-maker Xiaomi Corp. But China Tower showcases a more traditional strength of the city: serving as a venue where state-backed Chinese companies can raise capital.

China Tower is offering about 43.1 billion shares at an indicative price of HK$1.26 to HK$1.58 a share. That implies a maximum market capitalization of $34.7 billion, before any option to sell extra stock. In comparison, New York-listed American Tower Corp., which has operations from Peru to Nigeria, has a market value of about $62 billion.

Ten large investors agreed to buy US$1.4 billion of stock in the IPO, no matter where in the range it prices. So-called cornerstone investors are a fixture of the Hong Kong IPO market, especially in public-sector deals. This group includes Alibaba Group, China-focused investment firm Hillhouse Capital Group and hedge-fund giant OZ Management, as well as China National Petroleum Corp. and state-backed car maker SAIC Motor Corp.

Frank Xu, an analyst at hedge fund Q Fund Management (Hong Kong) Ltd., said there were questions about China Tower’s pricing power with respect to its three huge customers, and a lack of visibility about dividends.

Mr. Xu said while China Tower wasn’t expensive, he preferred listed units of the wireless operators, such as China Unicom (Hong Kong) Ltd., as ways to bet on the rollout of superfast next-generation mobile networks, dubbed 5G.

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