China Netcom Corporation Ltd said yesterday it will raise 5 billion yuan (US$602 million) to upgrade its fixed-line network by selling 10-year bonds to institutional and individual investors on China's mainland.

Beijing-based Netcom, China's second-largest fixed-line phone operator, will on Thursday offer 4 billion yuan of bonds with a fixed annual interest rate of 4.6 percent and 1 billion yuan of bonds with floating interest rates.

Netcom will raise funds through the bond sale to upgrade its fixed-line network, such as increasing its long-distance phone system capacity and improving local telecom infrastructure, the company said. Netcom said the whole network investment will total 45.4 billion yuan over the next few years.

Citic Securities Corp, China International Capital Corp and State Development Bank are three leading underwriters of the sale.

"Before Netcom is listed on overseas markets, a bond sale is the best way for us to raise money," said Lin Na, a PR executive at Netcom.

Zhang Chunjiang, general manager of Netcom, said the firm plans a listing next year.

Other leading domestic telecommunication carriers like China Mobile Communications Co Ltd, China Unicom Limited and China Telecom Corporation have all gone public overseas.

"Those carriers can raise money through selling stocks to provide users more value-added services, which is one way to boost revenue," said Gu Xianli, an analyst at Norson Telecom Consulting.

Netcom's telecom equipment investment for 2003 will reach 22 billion yuan, jumping 43.8 percent year-on-year, Norson reported.

China's telecommunication players often package their most profitable business in an initial share sale before selling more assets to the listed companies.

"Netcom hasn't mentioned its most profitable 'little smart' business in the statement of bond sales. The firm is likely to use the asset to attract investors' attention when going public," Gu said.

(Shanghai Daily December 2, 2003)