China Telecom May Raise $4 Billion in Shanghai Secondary Flotation

China Telecom Corp. (00728.HK) plans to list its shares on the main board of the Shanghai Stock Exchange, the state-owned telecom operator said Tuesday. The company’s stock was suspended by the New York Stock Exchange two months ago under an executive order from former U.S. President Donald Trump.

The company, which has its primary listing in Hong Kong, said it aims to offer as many as 12 billion A shares in Shanghai, or 13% of total shares outstanding. The company didn’t disclose pricing for the new listing. Based on China Telecom’s closing price in Hong Kong Tuesday of HK$2.65 ($0.34), it could raise around $4.13 billion from the listing.

The issuance of A shares will bring new opportunities for restructuring and development of China Telecom, Chairman Ke Ruiwen said Tuesday at a news conference. The company will further enhance its market competitiveness with the help of domestic and foreign capital markets, Ke said.

The company hinted as early as March 2018 that it was studying policies on A-share listing. Ke said Tuesday the company sees a “rare strategic opportunity” to list domestically given investor interest in 5G networks, cloud computing and digital transformation.

Part of the offering will be sold to strategic investors, and the specific allocation ratio will be determined according to the requirements of laws and market conditions, China Telecom said.

Company executives didn’t comment on whether the Shanghai listing plan was triggered by the NYSE suspension.

“We regard the global capital market and investors, including those from the U.S., as highly important,” Ke said.

China Telecom parent China Telecommunications Corp. was named last year by the U.S. Department of Defense as one of 44 Chinese companies that have links to the country’s military. Under Trump’s executive order, American individuals are barred from investing in such companies.

Trading in China Telecom’s American depositary shares, along with those of peers China Mobile and China Unicom, was suspended Jan. 11on the New York Stock Exchange. The three have filed an appeal with the exchange to reverse the suspensions.

After U.S. President Joe Biden took office, the new administration said it would extend a wind-down period for transactions with the 44 blacklisted Chinese companies to May 27 from Jan. 11. But Trump’s full investment ban that’s set to take effect Nov. 11 remains intact.

The company also reported Tuesday that it posted a net profit of 20.85 billion yuan ($3.2 billion) last year, up 1.6% from 2019. Revenue increased 4.7% year-on-year to 393.56 billion yuan.

China Telecom budgeted 87 billion yuan for capital spending this year, 46% of it for 5G network infrastructure.

As cell phone makers are under pressure from a widespread global chip shortage, China Telecom said it prepared contingency plans. Equipment to build 5G networks in 2021 as well as the chips needed for 5G phones will not be affected, it said. As of the end of 2020, China Telecom had 86.5 million 5G users, a quarter of the country’s total 5G customers.

China Telecom has been co-developing 5G networks with rival China Unicom. As of the end of 2020, the two companies had 380,000 5G base stations, covering all major cities. China Telecom said the two companies plan to build 320,000 more 5G base stations this year, expanding coverage to all counties and some villages.

Beijing has strongly pushed the 5G rollout, and 77% of all 5G smartphones sales worldwide during last year’s third quarter took place in China, according to data tracking firm IDC.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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