China Tower is looking to raise up to $8.7 billion during an initial public offering (IPO) in Hong Kong that would rank as the world's biggest IPO in four years if it hits targets, according to a report from Bloomberg.
The state-owned towers company will offer 43.1 billion shares priced at between HK$1.26 and HK$1.58 each, said Bloomberg after obtaining the terms of the deal. Those documents indicate that Hillhouse Capital and a division of China's Alibaba are among ten companies that have already agreed to spend $1.4 billion on shares, according to Bloomberg.
China Tower was formed in 2015 when China Mobile Communications Corp. , China Telecom Corp. Ltd. (NYSE: CHA) and China Unicom Ltd. (NYSE: CHU) agreed to pool some of their mobile assets to cut spending on equipment. (See Telcos pool $34.5B of assets in China Tower.)
Funds raised during the IPO could support investment in 5G infrastructure and help China's operators to launch 5G services more quickly.
The next-generation mobile technology has been designed to handle faster connections and should give operators a more efficient way to cope with demand for high-speed data services. In future, 5G might also be used to provide connectivity for new types of service, such as remote-control surgery and driverless transport.
The spending needs were highlighted in March when China Telecom said it would need another 2 million mobile basestations across China to handle 5G technology. Chengliang Zhang, the vice president of China Telecom Beijing Research Institute, told attendees at a conference in San Diego that his company would need a denser radio access network because signals do not travel as far over 3.5GHz spectrum, the frequencies it has earmarked for use with 5G services. (See China Telecom Eyes 2M+ Basestations for 5G.)
In November last year, China Mobile, the country's biggest operator, said it would have 10,000 5G basestations in commercial deployment in 2020 and was already exploring new business models to boost service revenues. (See China Mobile to Deploy 10,000 5G Basestations by 2020.)
Bloomberg's report indicates that Hillhouse has agreed to invest $400 million in a China Tower IPO, while Alibaba's Taobao will invest $100 million. Another investment company called Och-Ziff Capital Management is to invest $300 million, according to the report.
An IPO valued at $8.7 billion would be the world's biggest since Alibaba's $25 billion offering in 2014, notes Bloomberg. The current backdrop, it points out, is a slump in Hong Kong's equity market, with the Hang Seng Index down roughly 15% since January.
— Iain Morris, International Editor, Light Reading