China Telecom Cuts IPO
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China Telecom, the Ma Bell of China, has cut the size of its $3.7-billion IPO in half and again delayed the offering in order to make it more appealing to institutional investors.
Last week, the state-owned telephone company initially backed away from an IPO when U.S. investors were less than enthusiastic about another telecom offering in the middle of an industry-wide slump.
Instead, China Telecom focused on opening its U.S. headquarters in the Washington high-tech suburbs of Northern Virginia and promised to retool the IPO for issue this week. Company officials now say the IPO will debut next week.
China Telecom's new U.S. subsidiary, China Telecom (USA), plans to offer telecom services to American corporations doing business in China. The company has its own submarine cable circuit connecting the U.S. and China, as well as a U.S. transport backbone.
Since the Beijing-based company was incorporated in May, China Telecom has racked up more than $11 billion in revenue with 128 million customers, including more than 25 million dial-up Internet users. With that track record, China Telecom announced plans to sell 20 percent of the company in a public offering.
Despite those impressive numbers, the company found institutional investors balking at the proposed $11.50 share price. Because Chinese rules prohibit the sale of shares in state-owned enterprises for less than the net asset value per share, China Telecom was unable to lower the share price and was forced to reduce the total number of shares to be sold.
It is now selling 7.56 billion shares instead of 16.8 billion.