China Netcom announced today that it has signed a conditional sale and purchase agreement with China Netcom Group Corporation (BVI) Limited, its controlling shareholder, to acquire telecommunication businesses in Heilongjiang Province, Jilin Province, Neimenggu Autonomous Region and Shanxi Province.
After the acquisition is completed, the company will own more than 114 million access lines in service and more than 10 million broadband subscribers.
The total purchase price for the equity interest is CNY12.8 billion and consists of an initial cash payment and a deferred consideration. The company will also assume net indebtness of approximately CNY23.2 billion.
With a population of 122 million, these four regions accounted for approximately 10.3% of the total GDP of China in 2004 and recorded a GDP growth rate of 13.8% from 2003 to 2004. Fixed-line penetration rate reached approximately 24.9% as of December 31, 2004, relatively low compared to the company's existing service regions. Broadband and value-added services have recorded substantial growth over the past two years and are expected to continue to grow at a fast pace.
The company expects that the combined entity will better serve its large and medium corporate customers, especially those with business operations across regions. It will also lead to improvements in service quality.