Baidu, JD.com join 12 billion US dollar China telecom investment

World
Europe

Baidu Inc and JD.com will join other big Chinese technology firms to jointly invest about 12 billion US dollars in the Shanghai-listed unit of China Unicom, one of China's top three state-owned telecoms firms, according to Reuters report.

The move is part of the Chinese government's drive to rejuvenate state behemoths with private capital. Beijing added China Unicom last year to a first batch of state-owned enterprises to see mixed-ownership reform.

VCG Photo

Mixed-ownership in China Unicom

According to Reuters report, Alibaba Group Holdings and Tencent Holdings would be among new investors putting a total of about 10 billion US dollar into China United Network Communications Ltd, China Unicom's Shanghai-listed unit.

The total investing is likely to rise to about 80 billion yuan (11.8 billion US dollars), with about Baidu's 10 billion yuan and JD.com's 5 billion yuan, and about 15 billion yuan from Tencent and 7 billion yuan from Alibaba, while China Life Investment Holding Co Ltd would be the biggest new investor, with a 20 billion yuan commitment, according to Reuters report.

If successful, the deal would be the largest capital raising in the Asia-Pacific region since insurer AIA Group's 2010 initial public offering, according to Thomson Reuters data.

VCG Photo

Why China Unicom?

China Unicom, formally known as China United Network Communications Group Co Ltd, is one of the world's largest mobile carriers by user numbers, but its recent earnings have struggled in a fiercely competitive market.

Along with over-staffed, inefficient and slow to develop key technologies, this carrier now is facing lots of challenges in terms of further development. While, private firms such as Huawei and Xiaomi have moved ahead in developing cloud and big data services, and mobile software in the Chinese telecommunications market, which no longer stuck on state-owned firms.

VCG Photo

5G Push

After the share sale, China Unicom's stake in the Shanghai-listed business would fall to just above 40 percent, from 63 percent currently, according to a Reuters report. Top investors, including China Life Investment and Tencent, would likely have seats on the firm's board to engage in its operations and improve its management.

The share sale also comes at a time when Beijing is pushing to build the world's largest fifth-generation (5G) mobile network – bringing a significant speed upgrade from today's 4G network.

VCG Photo

China's 5G market could be worth 1.1 trillion yuan, or 3.2 percent of GDP, by 2025, according to a recent research paper from the Ministry of Industry and Information Technology.

If this deal works, China Unicom's capital raising will set the firepower to boost its spending on 5G. According to Reuters, the share sale plan is likely to be finalized by late August.

Baidu and JD.com declined to comment, and China Unicom, Alibaba, Tencent, and China Life Investment Holding didn't respond to request about this. China's State-owned Assets Supervision and Administration Commission (SASAC), which oversees state enterprises, also did not respond to requests for comment.

4km