Internet retail giants Alibaba and Tencent are reportedly planning to invest CNY70 billion ($10.3 billion) in China Unicom, as the Chinese government looks to funnel private capital into state-owned enterprises.
The two firms are expected to lead a consortium of investors, with Chinese search engine firm Baidu having withdrawn from the funding round. Other potential investors include state-supported entities such as China Life Investment, as well as other large Chinese internet companies.
China Unicom is the number two operator in China, and is listed on the Shanghai exchange. It will generate around CNY50 billion by issuing new shares and selling off some of its holding to the consortium. In early April, it announced that its parent firm was considering a restructure of its ownership to enable private investment.
In October 2016, Unicom revealed that it was under consideration for a pilot mixed ownership scheme that, if successful, could kick of a reform initiative by the Chinese government. Fitch Ratings commented at the time that such a project could increase the autonomy of the firm’s management as well as boosting its capital.
However, while the Chinese government is willing to reduce state ownership in order to boost private investment in the country’s telecoms infrastructure, it is not so keen to relinquish control. However, a statement from the Chinese Central Committee and State Council – i.e. the Chinese Cabinet – said that the government would provide “free rein to telecoms companies in the development of the internet”, as it believes that this will augment economic growth.