Deals of the year - Top quality issuers succeed in demanding markets
The success of this October's $2 billion China Telecom equity offering is easily explained: the company probably has the biggest potential for growth in the world. It is already the world's third-largest cellular company behind Japan's NTT DoCoMo and the UK's Vodafone AirTouch and is the third-largest stock on the Hong Kong stock exchange. And the Chinese telephone market will continue to grow fast as long as economic reforms and a freer business environment continue to be introduced.
China already has the third-largest number of cellular subscribers in the world after the US and Japan, yet the penetration rate was only 2% at the end of 1998 - ridiculously low when compared with mainland China's neighbours. Hong Kong, for instance, is 43.3% and South Korea's 30%. And a further boost should come from fixed-line provision, where the penetration rate is about 7%.
China Telecom's financial profile is already excellent. At end-June, its net cash was Rmb16.6 billion ($2 billion) and net interest income Rmb86 million. Additionally, its existing operation is very profitable. Half-year operating earnings totalled Rmb9.6 billion and the margin was 57%.