China Unicom to take over Netcom for $23.9 billion

China Unicom Ltd. will take over fixed-line-peer China Netcom Group Corp. for HK$187 billion ($23.9 billion) in stock, under the government’s strategy to reorganize the world’s biggest phone market.

Unicom, the smaller rival of China Mobile will pay 1.508 shares for each of Netcom's, valuing it 3 percent more than the last closing price, the companies said today.

Also, Unicom and its parent will sell the smaller of their two wireless networks to China Telecommunications Corp. for 110 billion Yuan ($15.9 billion) in cash.

According to analysts, however, the price is too high for a network that only broke even in 2006 after years of losses and which is a third of the size of Unicom's Global System for Mobile Communications network that fetched 62.78 billion Yuan in revenue in 2007.

The deal is the first major attempt to materialize the Chinese regulators’ plan of an extensive revamp of the mainland's telecommunications industry last month. The refurbishing is intended to further promote competition in China's fast-growing telecom industry while combining the various players into three entities to provide more advanced telecommunications age while encouraging foreign investment and billions of dollars in purchases from equipment makers.

The government plans to introduce so-called third-generation or 3G services during the Beijing Olympics in August.

Nearly a half-decade of waiting and several false starts, makes people skeptical that 3G would be rolled out soon, after nearly a half-decade of waiting and several false starts.

"The government is the owner of all the players and the umpire and determines the playing field," said Duncan Clark at the consultancy BDA in Beijing. "This is the first step toward 3G, but does it mean 3G will come sooner? That remains to be seen."

China Unicom, Netcom and China Telecom will resume trading on Hong Kong's stock exchange tomorrow after being halted since May 23, when they all surged following the announcement of the reorganization plan.