China Telecom doesn't have the capital to finance its new mobile business, but investors are lining up
The good news for China Telecom is it has a new mobile business. The bad news is it doesn't have the money to pay for it. The good news is investors—and government officials apparently—are lining up to give it money.
Telecom is paying 110 billion yuan ($15.8 billion) for the Unicom's CDMA network and business and expects to receive one of three 3G licenses by the end of the year.
But upgrade to 3G will cost at another 30 billion yuan ($4.32 billion), according to a Bank of China analysis—money the fixed-line operator doesn't have.
CEO Wang Xiaochu says it's considering an A-share listing on the domestic bourse—that's a no-brainer, but winning approval won't be straightforward.
However, it may receive a helping hand from the state assets body SASAC—reportedly SASAC is promising a handout of 30-50 billion yuan. Nice money if you can get it.
Telecom is also looking for strategic investors, and according to Wang, has had talks with "four or five" companies.
One of these is SK Telecom, a 6.6% shareholder in China Unicom. But its interest is CDMA and now the business has gone to Telecom, it has said it is willing to partner.
Another is CDMA technology supplier Qualcomm, which has stepped up talks with Telecom about taking a stake, while SingTel is reportedly also in the running, according to the Shanghai Securities News.
There are very few paths in to China's 3G for those who want a piece of the action. China Telecom is one of them.