China Unicom HK shares down on reform blow

Only Shanghai unit will change shareholding structure

Shares in China Unicom Hong Kong Ltd dropped nearly 4 percent on Thursday as investors expressed disappointment over its parent company’s signal that the much-expected mixed ownership reform may not involve the Hong Kong-listed firm.

Shares closed at HK$10.44 ($1.34).

The drop came a day after China United Network Communications Group Co, the country’s second biggest telecom carrier by subscribers, said there may be changes in the shareholding structure of its Shanghai-listed unit, China United Network Communications Ltd.

The Beijing-based group did not mention any changes at its Hong Kong-listed unit.

China Unicom is in the first batch of pilot projects to push forward mixed-ownership of State-owned enterprises.

Premier Li Keqiang said in March that concrete steps would be taken this year to accelerate reforms in sectors such as telecoms, railways and civil aviation.

China Unicom has been struggling to revive profits and revenue amid fierce competition from China Mobile Communications Corp and China Telecommunications Corp.

Xiang Ligang, a smartphone expert and CEO of telecom industry website cctime.com, said China Unicom is highly likely to attract an investor from among the ranks of internet giants such as Tencent Holdings Ltd, Baidu Inc and Alibaba Group Holding Ltd.

“China Unicom is suffering from a brain drain. Teaming up with internet moguls can help rebuild it as an open and energetic company and boost employee confidence,” he said.

“Also, their businesses are complementary, though it will be very, very time-consuming to integrate such resources.”

Teaming up with internet moguls can help rebuild it as an open and energetic company.” Xiang Ligang, a smartphone market analyst

China Unicom signed a deal with Alibaba in November to cooperate on basic telecom services, mobile internet and related areas. Last year, it also sealed a similar partnership with Baidu.

In 2016, its Hong Kong-listed unit posted a 94 percent decline in net profit to 630 million yuan ($91.15 million), due to a huge investment in 4 G and broadband network infrastructure. Revenue also fell 1 percent to 274.20 billion yuan.

Peter Liu, research director at consultancy Gartner Inc, said even if internet giants jump on board, they may chief ly play a symbolic role given that China Unicom would remain the majority shareholder and play a decisive role.