China Tower raises most in an IPO globally since 2016

Telecoms group generates $6.9bn from market debut

China Tower Corporation, the world’s largest telecommunications tower group by revenue, has raised $6.9bn its initial public offering, the biggest amount garnered globally in a market debut since 2016.

The state-backed Beijing-based company, which controls about 97 per cent of the network that supports China’s mobile communications, has sold shares at HK$1.26 each, valuing the company at about HK$217bn ($27.6bn).

China Tower’s IPO is the largest since Postal Savings Bank of China, which raised $7.4bn when it listed in September 2016, according to data provider Dealogic.

However, the IPO priced at the bottom end of the range, undershooting the company’s ambition to price at the upper end of the band at HK$1.58 a share, following lacklustre demand from investors.

The IPO price is a multiple of 7.1 times adjusted earnings before interest, tax, depreciation and amortisation for 2018.

If the overallotment option is exercised then the total amount raised would reach about $8bn. Shares will start trading next Wednesday.

The IPO follows on the heels of Chinese smartphone maker Xiaomi, which priced at the bottom of its range to raise $4.72bn, valuing the company at just half its original $100bn goal.

The damped investor demand comes as Chinese stocks have plunged over the past few months, with the Shanghai Composite index sliding into bear market territory in June. China’s economic growth has recently showed signs of slowing down, while trade tensions with the US continue to escalate.

Despite the lax investor interest, bankers say there is a strong pipeline of deals in Hong Kong, including fintech and biotech companies. Hong Kong Exchanges and Clearing has made a series of initiatives this year to attract listings, including allowing biotech companies that have yet to generate revenue or profit to float.

China Tower made a pre-tax profit of Rmb2.7bn ($398m) in 2017 but was lossmaking as recently as 2015.

Analysts said China Tower had an unchallenged monopoly of the domestic mobile market, which is dominated by government-backed groups. While China Tower controlled more than 1.8m mobile towers, the second-largest company in the market had just 17,260 towers, according to China Tower’s listing application.

The IPO attracted private and state-backed investors that bought a combined $1.4bn portion of the deal. Chinese private equity group Hillhouse Capital took a $400m stake and Alibaba took $100m. Other investors included state-owned Industrial and Commercial Bank of China, China National Petroleum Corporation and SAIC Motor. New York-listed OZ Management absorbed a $300m stake.

The joint sponsors for the China Tower float are CICC and Goldman Sachs. Bank of America Merrill Lynch and JPMorgan are joint global co-ordinators and joint bookrunners.