(From second left) Li Fushen, executive director & CFO of China Unicom (HK) Ltd, Wang Xiaochu, chairman & CEO of China Unicom (HK) Ltd, Lu Yimin, executive director& president of China Unicom (HK) Ltd, and Shao Guanglu, executive director & senior vice-president of China Unicom (HK) Ltd meet the media on Wednesday. ROY LIU / CHINA DAILY

Private capital takes role in State giant as it embarks on mixed-ownership reform scheme

China United Network Communications Group Co Ltd, the country's second-largest mobile carrier by subscribers, has agreed to raise a total of 78 billion yuan ($11.7 billion) from strategic investors, as part of the Chinese government's push to rejuvenate State-owned enterprises with private capital.

The strategic investors include Chinese tech heavyweights Tencent Holdings, Baidu Inc, JD.com Inc, Alibaba Group Holdings Ltd, Didi Chuxing, Suning Commerce Group, as well as Chinese car rail manufacturer CRRC Corp and financial insurance enterprise China Life Insurance Co Ltd. Other tech companies such as Yongyou Software Co and Wangsu Science & Technology, and domestic industrial funds also participated in the investment.

"We are the first SOE on the group level to undertake this mixed-ownership reform scheme. It's a historic opportunity for us to introduce well-established strategic investors to explore areas of cooperation with us, in a bid to improve our management structure with diversified shareholders," said Wang Xiaochu, CEO of China Unicom Hong Kong.

Wang said China Unicom will cooperate with strategic investors in the areas they specialize in.

"With the domestic IT giants, we will explore cooperative opportunities in retail systems, payment systems and cloud computing. With the industry funds, we will explore business opportunities with their numerous investor companies to create a win-win result."

Tencent, which invested 11 billion yuan, accounted for 5.18 percent of equity interests in China Unicom's Shanghai-listed arm, Baidu poured in 7 billion yuan, accounting for 3.30 percent, while Alibaba and JD invested 4.3 billion yuan and 5 billion yuan, accounting for 2.04 percent and 2.36 percent, respectively, according to China Unicom.

The company said the mixed-ownership reform proposal was approved by the country's top economic regulator, the National Development and Reform Commission, and the share issue proposal has been approved by the board of China Unicom's listed company.

Furthermore, the Shanghai-listed arm will allot three board seats to private investors, and the mixed-ownership restructuring will be completed by the end of this year.

The investment is part of the government's drive for State behemoths to be revitalized with private capital, with China Unicom among the first batch of State-owned enterprises to see mixed-ownership reform.

"China Unicom is the biggest beneficiary of the mixed-ownership reform, as it could utilize cutting-edge technologies from internet giants, access more channels and potential customers, as well as enhance its telecom service quality through introducing new strategic investors," said Peter Liu, research director at consultancy Gartner Inc.

Liu added the telecom carrier will make more efforts in 4G network construction, boosting its broadband penetration rate across the country.

Xiang Ligang, chief executive of telecom industry website Cctime, said China Unicom will cooperate with newly introduced investors in the fields of big data, internet of things, artificial intelligence and cloud computing.

"It is expected that the move will boost China Unicom's 4G user base and improve network infrastructure construction," he said.

The telecom operator also said its first-half net profit rose 68.9 percent to 2.42 billion yuan from 1.43 billion yuan a year earlier, while its revenue fell slightly to 138.16 billion yuan from 140.26 billion yuan the previous year.

In the first half of 2017, its 4G subscriber group witnessed a net increase of 34.26 million to a total of 138.81 million.