China Tower disappoints at IPO launch in Hong Kong
August 14, 2018 Category China News Round-up, Weekly
China Tower, at USD6.9 billion the world’s largest initial public offering (IPO) of 2018, opened with a whimper in Hong Kong, extending the trend of lackluster debuts as investors appear to have grown tired of blockbuster stock sales. Shares of the Beijing-based company traded for the first time at HKD1.26, unchanged from their offer price, even as China Tower offered them at the bottom of the price range. As many as HKD5.5 billion of shares changed hands, making China Tower the second-most heavily traded issue on the Hong Kong exchange. “The IPO size is huge, and it came at a time when liquidity is not abundant in Hong Kong, so it would have been hard for the stock to see a big jump,” said Ronald Wan, Chief Executive for Partners Capital International. “The public’s enthusiasm for IPOs has also decreased.” At USD6.9 billion, China Tower’s offering is the eighth-largest in Hong Kong’s history, according to Dealogic. It has lined up USD1.42 billion from 10 cornerstone investors. Hillhouse Capital is the largest among them, having agreed to buy USD400 million worth of shares.
China Tower, which operates the telecommunications towers for China’s three cellular phone networks, raised at least HKD54.3 billion in its IPO, making it the largest global offering since Postal Savings Bank of China raised USD7.6 billion in 2016. “I’m happy that our offering has received a good response from global long-term investors, sovereign wealth funds, hedge funds, and Chinese financial institutions,” said company Chairman Tong Jilu. As a key part of China’s ambition to implement a 5G network as early as 2020 and lead the global race, China Tower plans to build more base stations in the country. But that has raised concerns among investors about China Tower’s cash flow, as the construction requires large amounts of capital investment by the heavily indebted company. The company may share transmission towers with electricity distributors to keep its construction costs down, Tong said, and has signed contracts with State Grid Corp of China and China Southern Power Grid to do so.
China Tower was formed in 2014 through the merger of the transmission operations of China Mobile, China Unicom and China Telecom. The three mobile carriers together own more than 90% of China Tower, and also contribute 99% of its revenue, the South China Morning Post reports.
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