China Unicom Ltd. (IPO Fact Sheet) (June 5, 2000)



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Listing Information

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China¡¦s second large telecom operator road-showed their forthcoming debut in Hong Kong Stock Exchange despite recent weak market conditions. The Group offers its ordinary shares in the USA, Canada, Europe and institutional investors in Hong Kong by way of American depositary shares(ADSs). Each ADS represents 10 ordinary shares. The following information is not finalized and subject to change.

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Key Data

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Total new shares to be issued

: 2,459,127,000 which consist

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An offering of 86,069,400 ADS in the United Sates and Canada

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An European offering of 73,773,800 ADS

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An Asian offering of 73,773,800 ADS to professional and institutional investors

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A Hong Kong public offering of 122,957,000 shares

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Issued price

: HK$11.5 to $14.5

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Total amount to be raised approximately

: HK$28.2b to $35.7b

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Market capitalization

: HK$140.1b to HK$176.6b

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FY99 PER (post IPO)

: 167x to 210x

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Estimated FY00 PER (post IPO)

: 267x to 337x

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Price to EV/EBITDA (FY99)

: 10x to 12.5x

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Net earning forecast for FY00

: RMB525m

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Stock code

: 762

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Joint Global Sponsors and Joint Bookrunners

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Morgan Stanley Dean Witter

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China International Capital Corporation

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ABN Amro Rothschild

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CLSA Emerging Markets

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DBS Asia Capital Ltd

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Jardine Fleming Securities Ltd

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Time Table

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Road show

: 29th May-5th June 2000

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Public offer

: 13th June-16th June 2000

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Pricing

: 16th June 2000

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Trading

: 22nd June 2000

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Company Background

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The State Council approved the formation of Unicom Group in 1993 as to introduce orderly competition to the telecom sector in China. Since then, the Group commenced to operate a GSM cellular network and domestic long distance network. It also developed a national paging business through subsidiary Unicom Paging. In May 1997, the State council granted further approval to the Group to provide data services. In March 2000, The Ministry of Information Industry licensed Unicom Group to provide Internet services and Internet protocol telephony services on a nationwide basis. Lately, the State Council also granted approval to the Group to develop a CDMA cellular network.

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Business

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The Group provides a wide categories of telecom services including cellular, paging, long distance, data and Internet services which are summarized as follows:

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1)Cellular: Unicom has a total of 4.2 million subscribers at the end of 1999, representing 14.2% of the market share in its service area.

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2)Paging: It is the largest paging operator in China and is accounted for 59% market share with a total subscribers of 43.5 million at the end of 1999.

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3)Long distance and IP phone services: Commenced the services in 1999 and is now covering 25 major cities and will significantly expand to 220 cities by the end of 2000. For IP phone services, 140 million minutes have been sold since its launch in June 1999.

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4)Data services included leased line, frame relay, asynchronous transfer mode(ATM), and virtual private network(VPN), internet access and web hosting services will launch in 220 main cities by the end of 2000.

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The following table depicts comparable operational figures

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1997

1998

1999

2000E

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Total revenue

100%

100%

100%

100%

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Cellular services

6.1%

15.2%

30.5%

45%

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Paging services

54.4%

60%

51.8%

40%

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Sale of pagers, handsets and Sim cards

39.4%

24.8%

17.2%

10%

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Long distance and data services

-

-

0.5%

5%

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Market share

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1997

1998

1999

2000E

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Cellular (in service area)

3.6%

7.1%

14.2%

25%

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Paging (nationwide)

68.9%

63.8%

59%

53%

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Competitive Advantages

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The Group is determined to develop more advanced technology, better network and better customer services in order to increase its subscribers¡¦ base.

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Obtained endorsement from Chinese government to offer discount tariff to enhance competitiveness.

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Ministry of Information Industry has no current plans to issue additional licenses for cellular operation in China.

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In paging market, it is the market leader in terms of market share, network technology, customer service and brandname.

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In long distance telephone market, It has recently built a more advanced network with lower construction cost because of current better technology and that will enable it to charge lower tariff.

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In the area of data and internet service, the Group¡¦s competitive edge is its transmission quality in terms of network bandwidth, scope of services and price.

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Future Plans and Prospects

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The Group¡¦s development focus will be on the high margin areas such as cellular, long distance and internet service.

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Enhance its strength as integrated provider of telecommunication services by deploying a nationwide advanced broadband fiber optic network.

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Improve constantly its customer services to attract new subscribers to cellular, paging, long distance and internet services.

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Capture a significant market shares in all services spheres by providing high quality services at lower cost.

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In view of China¡¦s huge market potential for telecom services, it is anticipated that a second player will be well absorbed by demand and growth paces will be speeded up by the country¡¦s entry to WTO shortly.

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Use of Proceeds

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To expand and upgrade cellular, long distance, data and fiber optic transmission networks.

Deposit to interest bearing accounts or invest in short-term grade debt securities.

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Summarized Financial

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(million)

1997

1998

1999

2000E

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Turnover

13,374

14,029

17,450

25,044

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Net Profit

599

372

839

525

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Opinion

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Since telecommunication industry has undergone rapid development in China for the last few years, in particular cellular services, as a result the CAGR for mobile phone subscribers is 77.6% from 1997 to 1999, the greatest among all telecom services and the rate is expected to increase continuously. We found that Unicom positioned itself in a huge and fast growing market with great earning potential.

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We further recommend investors to subscribe for short term trade and buy in when drop to low level. Generally speaking the Group¡¦s development future is optimistic.

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