China Unicom said to prepare mixed-ownership announcement

China Unicom (Hong Kong) Ltd. and its Shanghai-listed affiliate are poised to announce mixed-ownership-reform plans that are part of a Chinese government push to draw private capital into its state-owned enterprises, according to a person familiar with the matter.

While the person declined to specify details, including which specific companies would be attracting private capital, Daiwa Securities Group Inc. has indicated that the Shanghai-listed company would be more likely than the Hong Kong-traded carrier to be the subject of such restructuring.

Shares of Hong Kong-listed Unicom, whose market value exceeds USD30 billion, and China United Network Communications Ltd. in Shanghai were suspended from trading yesterday, pending an announcement on inside information. A Shanghai representative for Unicom couldn’t immediately be reached for comment.

Unicom’s parent was among six state-owned enterprises that the National Development and Reform Commission selected in September for a pilot program in mixed-ownership reform –
China’s preferred term for partial privatization. It’s part of the government’s broader push to overhaul its bloated SOEs, whose total revenue figure rivals the size of Japan’s economy.

During the past months, China Unicom has signed cooperation agreements with  Baidu Inc., Alibaba Group Holding Ltd. and Tencent Holdings Ltd., moves that have generated speculation that the Internet companies would get involved in the government mixed-ownership plan. Representatives at the technology companies either had no comment or didn’t immediately respond to requests for comment.

The government owns China United Network Communications Group Co. – also known as Unicom Group – which is the country’s second-largest mobile-phone carrier. The group, in turn, controls Hong Kong-listed China Unicom and Shanghai-listed China United Network Communications Ltd.

Prior to yesterday, the prospect of mixed-ownership had helped boost China United’s shares 80 percent since October in Shanghai, while the Hong Kong unit had gained more than 16 percent.

Ownership changes at Unicom Group could serve as a model for other state firms because of its selection in the government pilot program. The other SOEs recruited into the experiment are China Southern Power Grid Co., Harbin Electric Corp., China Nuclear Engineering Group Corp., China Eastern Air Holding Co. and China State Shipbuilding Corp.

Mixed-ownership could be emerging as key theme this year from last year’s focus on mergers. Li Jin, chief researcher at China Enterprise Institute, expects consolidation to continue, estimating that the total number of SOEs managed by the central government will fall to about 80 by the end of the decade from more than 100 last year. Prudence Ho, Bloomberg