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China Telecom puts off stock sale
By Alex Frew McMillan
HONG KONG, China (CNN) -- China Telecom has put off its huge initial public offering to next week due to lackluster demand. "We need to reopen the deal," a source familiar with the offer told CNN on Thursday. "The reason why we want to relaunch it is, we want to adjust the price." "We will relaunch the deal no later than early next week," the source said. The fixed-line phone giant was attempting to raise $3.2 billion to $3.7 billion in a massive stock offering. If it gets off the ground, it will be the largest stock sale in Asia this year and the third-largest in the world. Book building to start againThe "book building" process -- in which investment bankers solicit interest -- will now start again next week with a lower price range, the source said, requiring a change in the prospectus. China Telecom is waiting for regulatory approval to restart its stock offering from the regulatory bodies in Beijing, Hong Kong and New York before it sets a precise date to relaunch. The company was due to price its stock sale on Thursday in Hong Kong, with an eye to beginning trading on November 6 in New York and the next day in Hong Kong. It will now not meet those deadlines. A bear market and a slump in telecoms worldwide has hampered demand for the shares. Expected at low end of rangeThey were already expected to price at the low end of its range of HK$1.48 to HK$1.71. That range will now be adjusted downward. Morgan Stanley, Merrill Lynch and China International Capital Corp. are the lead managers of the initial public offering. China Telecom had a monopoly on phone communications in China until the mid-1990s. It has since been split into four, though China Telecom still got the lion's share. (Full story) China Mobile and China Unicom, the country's two cell-phone services, are already public in Hong Kong. China Telecom's main rival, China Netcom, is looking to sell stock for the first time in 2003. China Telecom is selling a total of 16.8 billion shares, or 20 percent of the company. It reportedly sold out the Hong Kong portion of its offering, around 5 percent of the company. Pushing privatizationBut it had a tougher time filling the international portion, 15 percent of its shares, given investors' reduced appetite for risk. Analysts had suggested now was not the best time for China Telecom to sell stock if it wanted to recoup the most money. (Full story) But China's government has pushed forward its privatization program and telecom reforms, particularly since it joined the World Trade Organization last year. To attract investors, the company had already increased international phone rates from the mainland, raised its promised dividend and lowered its offer range. But that was still not enough.
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