Five Operators to Pay RMB 5 bln in Profits to MOF

The Beijing Times, 12/20/07

The Ministry of Finance (MOF) and the State-Owned Assets Supervision and Administration Commission (SASAC) have issued notice that China Mobile (NYSE: CHL; 0941.HK), China Telecom (NYSE: CHA; 0728.HK), China Netcom (NYSE: CN; 0906.HK), China Tietong and China Satcom are to pay a combined total of RMB 5 bln in profits to the state.

However, an RMB 130 mln payment from China Unicom (NYSE: CHU; 0762.HK; 600050.SH) is to be waived. According to a company insider this is due to the company's capital structure - Unicom is not a wholly-owned state company, but is owned 80% by the state and 20% by 14 minority shareholders. According to a China Academy of Telecommunication Research (CATR) expert, the government may have opted to hold back on collecting profits as Unicom is listed both overseas and within China and has a complex share structure.

However, another expert points out that Tietong has a similar structure, with multiple shareholders, and that the MOF and SASAC document covers stock dividends for shares in companies that are government owned in whole or in part.

LENS: In contrast with the explanations provided by both the Unicom insider and MII experts mentioned above, several industry insiders have suggested that the omission of Unicom from SASAC's SOE profit-sharing plan is a sign that SASAC plans to restructure Unicom some time in the near future.

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