China Unicom Ltd., the smaller of China's two mobile carriers, said Monday it planned to issue up to 10 billion yuan (US$1.21 billion) in short-term debt.

China Unicom's sister firm, Shanghai-listed China United Telecommunications Corp. Ltd., whose assets include holdings in the Hong Kong-listed firm, also issued a similar statement in the Shanghai Securities News.

Both companies said the debt issue had won board approval but needed the go-ahead from the People's Bank of China.

They said the debt would carry a term of no more than 365 days for repayment. No plans were given for how the money would be spent.

CLSA analyst Francis Cheung said the funds raised could be used to pay off existing obligations, since Unicom has 11 billion yuan worth of debt that it must repay by the end of this year.

"There may be other reasons, but there's nothing apparent that would need that much money," he said.

Kim Eng Securities analyst Edward Fung said the issue could also be related to a highly anticipated industry restructuring expected either later this year or in 2007.

Hong Kong-listed Unicom's shares ended down 1.53 percent Monday trading at HK$6.45, while Shanghai-listed Unicom's shares ended up 1.11 percent at 2.73 yuan.

Both companies reported declines of about 25 percent in their first-quarter profits, blamed on fierce competition in the world's largest cell phone market by subscribers.

(Shenzhen Daily June 28, 2005)