China Unicom Leads 2nd Round of Mixed Ownership SOE Reforms

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The second round of mixed-ownership trial reforms of China’s central state-owned enterprises is waiting eagerly in the wings, led by telecommunications giant China Unicom.

According to China Securities Journal Beijing is accelerating the approval of trial reforms for the mixed ownership of six central SOE’s, and plans to launch them prior to the year’s end.

China Unicom Takes the Lead in Mixed Ownership Reforms

China Unicom has already confirmed plans to proceed with mixed-ownership reforms , via an issue of new A stocks, with other state-owned enterprises as well as Baidu, Ali Baba and Tencent on the list of aspiring shareholders.

On 5 April China Unicom issued a suspension notice and announced that it was advancing key arrangements in relation to mixed-ownership reforms that would involve the company’s A shares.

On 10 April at the China Unicom’s annual shareholders meeting the company announced that it would soon produce a detailed plan for mixed-ownership reforms.

According to analysts these announcements mark the formal launch of mixed ownership reforms for the telecom giant nearly half a year after it entered cooperative arrangements with China’s biggest tech companies.

In November China Unicom executed separate strategic cooperative agreements with  Ali Baba, Baidu and Tencent covering multiple operations including mobile internet, artificial intelligence, big data, cloud computing and basic communications services.

Analysts interpreted this as portending the possibility of all three companies becoming strategic investors in China Unicom, most likely via A-share cross ownership.

Should Ali Baba, Baidu and Tencent become key cooperative stakeholders in China Unicom via an issue of new A shares, it would be a major boon for the company in two chief areas.

China Unicom would have access to the vast resources possessed by these tech giants who bestraddle the national market.

Even more importantly could the possibility of incorporating share issues into the remuneration plans of employees, serving as a spur to improved performance by binding the interests of senior executives more tightly to the company itself.

Further SOE Mixed-ownership Reforms in the Pipeline

China Unicom’s plans are likely just the start of further mixed-ownership reforms of key state-owned enterprises.

Orient Securities considers at least several other central SOE’s in the energy, civil aviation and shipping sectors to be likely candidates for mixed-ownership reforms later this year.

These include China Southern Airlines, China Eastern Airlines, China Nuclear New Energy Investment and Sinopec.

 

 

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