China Netcom Group Corporation (Hong Kong) Limited (China Netcom or the Company) has announced that China Netcom (Group) Company Limited (CNC China, has entered into a conditional Asset Transfer Agreement, pursuant to which CNC China has agreed to dispose off its telecommunications assets, liabilities and business operations in Guangdong Province and Shanghai Municipality of the PRC to China Network Communications Group Corporation (the Parent Company). The completion of the disposal is expected to take place before the end of February 2007.
According to the Transfer Agreement, the cash consideration of the disposal is $449.89 million. The Parent Company will pay an initial amount of $134.97 million (equivalent to 30% of the consideration) in cash the first business day following the completion of the disposal and will pay the remaining $314.92 million (equivalent to 70% of the consideration) in cash within 30 days after completion of the disposal. In addition, the Parent Company will assume the debt of CNC China in the aggregate principal amount of $385.62 million upon completion of the disposal. Furthermore, the Parent Company has granted CNC China a first right under the Transfer Agreement to acquire the abovementioned assets, liabilities and business operations if the Parent Company decides to dispose of them in the future at terms equal to or no less favourable than those offered by the Parent Company to other parties.
Completion of the disposal is conditional on the passing of an ordinary resolution by independent shareholders and the receipt of approvals or consents from the relevant PRC authorities.
Regarding the consideration of the disposal of the Target Assets, Mr. Zuo Xunsheng, China Netcom’s CEO, commented, “The consideration of the disposal of the Target Assets was determined on various factors, including the quality of the assets being sold, their growth prospects, earnings potential and competitive advantages in their respective markets, as well as by reference to other financial and operational indicators. As a result, the management believes that the terms of the Asset Transfer Agreement are fair and reasonable and in the interests of the Company and its shareholders.”
Mr. Zhang Chunjiang, Chairman of China Netcom, concluded, “China Netcom has extensive network resources and higher profitability in the northern service region. After the sale of the Guangdong and Shanghai assets, we will be well-positioned to concentrate our resources in the northern service region. The Board believes that the disposal will enable us to take better advantage of the growth opportunities and reinforce our competitiveness in terms of operations and services in our northern service region. We are confident that this will result in better financial results in the future.”
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