Shanghai-listed Yangtze Power Co has signed a contract with
Datang Mobile to pay 1.3 billion yuan for a 12 percent stake in
Datang, a key developer of Chinese home-grown standard for
third-generation (3G) mobile phone services, TD-SCDMA, a source
said.
The country's two largest insurers, China Life Insurance Co and
Ping An Insurance Co will also buy stakes from Datang but are still
negotiating on the amount of stake and price. Each of the two
insurers is expected to invest at least 1 billion yuan into Datang,
the source said.
The cash injection is expected to boost cash-strapped Datang,
which has been developing TD-SCDMA to catch up with rival foreign
standards WCDMA and CDMA2000.
This comes hard on the heels of an interest-free loan China
Development Bank awarded to Datang for TD-SCDMA development in
April. The 15-year loan was reportedly worth 4.6 billion yuan.
The backing from China Life, Ping An Insurance and Yangtze Power
underlines the increasing momentum TD-SCDMA is gaining, which could
benefit Datang.
Datang says it owns the majority of core intellectual property
rights (IPRs) of TD-SCDMA.
The government has yet to license the 3G telephony in the
country but many observers now expect TD-SCDMA to grab a third of
the market in the future because of the strong backing from the
government.
This is luring some companies to invest in companies like Datang
in anticipation of high returns after the government gives its nod
to operators to build 3G networks based on TD-SCDMA.
Chen Yicong, an electric power and equipment industry analyst
with Southwest Securities, said: "As the operator of Three Gorges
Dam, the world's largest hydropower project, Yangtze Power is a
good company with relatively low ratio of debts to assets and has
made successful investments in electric corporations in Shanghai,
Hubei and Guangdong.
"The expected purchase of stakes in Datang is because of Yangtze
Power's anticipation of high returns. The deal is like the one in
which Yangtze Power acquired stakes in China Construction Bank and
profited from the bank's rising share prices."
Shares of Yangtze Power have risen 12.32 percent in the past six
trading days even as the Shanghai Composite Index slid from 3,973
to 3,899.
Chinese operators have been building TD-SCDMA trial networks in
several cities. Earlier this year, China Mobile Communications Corp
expanded its own trial 3G networks from Xiamen to eight cities with
an investment estimated at nearly 30 billion yuan.
(China Daily July 4, 2007)