China Unicom to buy fixed line operator Netcom for $23.9 billion in stock

China Unicom Ltd, the country's second-biggest mobile-phone carrier, will buy fixed-line operator China Netcom Group Corporation for HK$187 billion ($23.9 billion ) in a share swap deal and sell a mobile business, under a government-backed merger scheme.

Unicom and its parent will also sell the smaller of their two wireless networks to China Telecommunications Corporation for 110 billion yuan ($15.9 billion) in cash.

Unicom will pay 1.508 shares for each of Netcom's, in an offer that values the company three per cent above its last closing price, while each American Depository share of China Netcom would be valued at 3.016 American Depository shares of new China Unicom, the companies said.

The deal was valued at 439.17 billion HK dollars (US$56.34 billion), based on the closing price of China Unicom at 18.48 Hong Kong dollars per share.

The merger is expected to introduce more competition into the telecoms industry, as part of the overhaul planned by the State-owned Assets Supervision and Administration Commission of the State Council and the ministry of industry and information.

The new China Unicom, by incorporating China Netcom, would focus on its global system for mobile communications (GSM). China Unicom originally operated both mobile networks.
 
China Unicom said the sale of CDMA operations would help the company to concentrate on development of its GSM technologies for the third-generation high-speed wireless services (3G).
 
China Mobile Communications Corporation was the first to reveal a broader plan for its acquisition of fixed-line operator China Tietong Telecommunications Corporation.

China's five state-owned telecom companies - China Mobile, China Telecom, China Unicom, China Netcom and China Tietong – are expected to be restructured into three groups with both mobile and fixed-line capabilities.

The government-led revamp aims to increase competition by creating companies that provide mobile and fixed-line services. Unicom is still far behind China Mobile Ltd, whose profit is double that of the other three state-owned carriers combined.