China Netcom Group Corp (Hong Kong) Ltd will sell its telecommunications assets in Shanghai and Guangdong Province to its parent company. The sale price for China Network Communications Group Corp is 3.5 billion yuan (US$448.7 million).

The Hong Kong-listed subsidiary said the transfer of the unprofitable assets will make it concentrate the business in the northern regions of China, and improve profitability. Industry insiders, however, said the deal is a prelude of telecom mergers ahead of 3G. According to the deal, China Network will pay an initial 1.05 billion yuan in cash, or 30 percent of the total transaction value, on the first following working day after completion of the sale.

It will pay the remaining 2.45 billion yuan in cash within 30 days. In addition, China Network will assume the debt of China Netcom's Shanghai and Guangdong branches of three billion yuan. The completion of transfer, still awaiting approval from the regulator and shareholders, is expected to finish by the end of next month.

China Netcom has been granted a first right to acquire the assets, liabilities and business operations if the parent company decides to dispose of them in the future. China Netcom has extensive network resources and higher profitability in the northern service region. After the sale of the Guangdong and Shanghai assets, we will be well-positioned to concentrate our resources.

The disposal is the first of its kind among listed Chinese telecom carriers. Hong Kong-listed China Netcom posted a profit of 5.81 billion yuan in the first half of 2006. In Shanghai and Guangdong, China Netcom operates office building Internet access and data services and public fixed-line phone business. That has increased costs because lines have to be rented from rival China Telecom.

Source:未知