The share price of China’s biggest fixed line operator China Telecom Corporation fell by more than 6% in early trading on the Hong Kong stock exchange after the company revealed plans to float 11% of its share capital to help fund the acquisition of more networks from its parent company, China Telecom Group. Formed in September 2002 from the spin-off of China Telecom’s assets in Shanghai, Jiangsu, Zheijiang and Guangdong, over the past 18 months China Telecom Corp has been acquiring the remaining fixed line networks of its parent. In October last year it purchased the parent company’s networks in Anhui, Fujian, Jiangxi, Guangxi, Sichuan and Chongqing, and under the latest deal will pay around USD3.3 billion for ten more, mainly in the Gansu, Xinjiang and Guizhou provinces.
China Telecom Corp will no doubt be hoping for a greater level of interest in its forthcoming share sale than was apparent at its November 2002 IPO, through which a 10% stake was publicly floated. The share offer was subject to a series of delays and, in a bid to get the sale off the ground, its price was eventually slashed by 55%. Despite the price cut, interest in the stock was unexpectedly muted, with a lack of investor confidence leaving it heavily undersubscribed.