Shulou(Shulou.com)11/24 Report--

"China United Network Communications Co., Ltd. plans to spin off its subsidiary Unicom Zhao.com Technology Co., Ltd. to be listed on the Shanghai Stock Exchange Science and Technology Innovation Board. After the completion of this spin-off, the company's ownership structure will not change and will still have a controlling stake in Zhain.com technology."

On March 9, 2022, China Unicom issued prior approval and independent opinions on matters related to the spin-off of its subsidiaries to the listing of Science and Technology Innovation Board on the Shanghai Stock Exchange, which is also the first published progress since the release of the spin-off listing plan in August 2021. In recent years, the spin-off and listing of operator subsidiaries has been "big thunder, little rain", the news spread in an uproar, but has not seen much actual action. For a long time, operators have been undervalued by the capital market, so why are they still obsessed with the listing of spin-off subsidiaries?

Spin-off listing is the "white moonlight" in the hearts of operators. As soon as the announcement of China Unicom comes out, it can be regarded as a real answer to the "cake" painted a few years ago. According to the announcement, after this split, Zhi.com Technology will be listed independently, promote the upgrading of Zhi.com 's technological level and the expansion of its business scale, and further enhance the influence of China Unicom in the field of vehicle networking. and then inject new development vitality into the excellence and strength of China Unicom.

It is reported that Zhi.com Technology will be issued at an appropriate time after the approval of the Shanghai Stock Exchange and the registration of the China Securities Regulatory Commission, and the specific issuance date will be authorized by the general meeting of shareholders of Zhao.com to determine after the approval of the Shanghai Stock Exchange and the registration of the China Securities Regulatory Commission, and the number of shares issued this time accounts for no less than 25% of the total share capital of Zhi.com Science and Technology.

Prior to this, Tianyi Yun once stood on the "tuyere and wave tip" of the spin-off and listing of China Telecom subsidiary. At the 2021 results presentation meeting of China Telecom, China Telecom Chairman Ke Ruiwen said publicly that the company would actively explore the possibility of Tianyi Cloud spin-off listing under the conditions of compliance with regulatory rules.

As early as 2022, China Telecom signed Tianyi Yun's capital and share increase framework agreement with four large state-owned enterprises, including China Telecom, China Electronics, China Chengtong and China Guoxin, and completed the equity change on February 24, 2023. The equity diversification reform will help Tianyi Cloud integrate cloud computing ecological resources, strengthen the independent control of key core technologies, deepen reform and enhance enterprise vitality, strengthen Tianyi Yun's core competitiveness in all aspects, and enhance its market expansion ability in digital government, digital society, vertical industries and other fields. In such a strong background, Tianyi Cloud spin-off listing may only need an appropriate time.

"for example, one of our companies, which makes chips on the Internet of things, is currently carrying out employee stock ownership reform. if the conditions are right, we will also take some measures to split and go public." Yang Jie, chairman of China Mobile, gave the above answer as to whether China Mobile will spin off some of its businesses. The "company that makes the chips of the Internet of things" has been speculated by the industry to be the wholly-owned subsidiary Xinyi Technology funded by China Mobile Internet of things Co., Ltd. Core Technology aims to promote the revitalization of the national integrated circuit industry, with the mission of "creating a core to drive the Internet of everything and accelerating the transformation of digital intelligence in society", and is committed to becoming the "most innovative leader in the chip and application of the Internet of things".

In the early days of its establishment, core technology was pinned on the high hope of "listing", proposing to forge new capabilities for independent operation, market operation, capital operation, reform and innovation, and at the same time plan a new layout through the establishment of joint laboratories, applications for major national projects, foreign capital cooperation, the introduction of high-end talents, the establishment of overseas R & D centers, and landing science and technology.

Where is the "hard wound" of the difficulty of spin-off and listing? The split of listed companies is an important means for the capital market to optimize the allocation of resources and deepen the function of mergers and acquisitions, which helps companies to further achieve business focus, enhance the level of professional management, and better serve scientific and technological innovation and high-quality economic development. As to how to realize the separation of listed companies, the CSRC has given seven rigid conditions:

1. The shares of listed companies have been listed for three years.

2. The listed company has made continuous profits in the last three fiscal years, and after deducting the net profits enjoyed by equity in the proposed spin-off subsidiaries in the last three fiscal years, the cumulative net profit belonging to the shareholders of the listed company shall not be less than 1 billion yuan.

3. The net profit of the subsidiary to be split according to equity in the consolidated statement of the listed company in the last fiscal year shall not exceed 50% of the net profit of the consolidated statement of the listed company, and the net assets shall not exceed 30% of the net assets of the consolidated statement of the listed company.

4. There is no situation in which the funds and assets of a listed company are occupied by the controlling shareholder, the actual controller and its related parties, or other major related transactions that harm the interests of the company.

5. The business and assets in which a listed company issues shares and raises funds in the last three fiscal years, and the business and assets purchased through major asset restructuring in the last three fiscal years, shall not be regarded as the main business and assets of the subsidiary to be spun off.

6. the shares held by the directors, senior managers and related personnel of the listed company and the subsidiary to be spun off shall not exceed 10% of the total share capital of the subsidiary before the spin-off and listing.

7. The listed company shall fully disclose and explain that this spin-off is beneficial for the listed company to highlight its main business and enhance its independence; there is no inter-industry competition between the listed company and the subsidiary to be spun off, and the assets, finance and institutions are independent of each other; there is no cross-appointment of senior managers and financial personnel; and there are no other serious defects in the independence of the subsidiary to be spun off.

For China Telecom and China Mobile, which only returned to the A-share market in 2021, the spin-off listing has been aborted on the first requirement, and the split listing will not be achieved until at least 2024. On the other hand, China Unicom was listed on the main board of the Shanghai Stock Exchange as early as October 9, 2002, which meets the requirement that the shares of listed companies have been listed in China for three years.

At the annual performance presentation meeting of China Unicom in 2022, Chen Zhongyue, general manager of China Unicom, said that China Unicom hopes to make full use of capital market support as an independent listed company after the spin-off and listing of China Unicom. Promote the development of innovative business, improve business quality and competitiveness; effectively implement China Unicom's "1-9-9-3" strategic planning system to maximize the scientific and technological interests of China Unicom and Zhi.com. Enrich Zhi.com technology equity operation and financing channels, lay the foundation for long-term development; at the same time, help China Unicom to create a new ecology for industrial development, and continue to contribute Unicom to the construction of transportation power, network power and digital China.

"spin-off listing can bring financing for operators, introduce strategic partners, and provide better incentives for employees."

Yang Guang, senior chief analyst at Omdia, said that sufficient funds can support the R & D market, strategic investment can form synergy, and effective incentives can increase employees' motivation, and the positive impact is optimistic. "but the price is that the shares of the parent company have been reduced. But in the long run, as the business grows, the shares of the parent company will be less, but the value will increase." Yang Guang told reporters.

It is certain that the spin-off and listing of operator subsidiaries will become a major trend of future development, but the time is not yet fully ripe. The spin-off listing of Zhi.com technology has played a good leading role for the subsequent spin-off and listing of operators. Recently, operators represented by China Mobile have "made great progress" in the A-share market, allowing unvalued operators to regain their foothold in the capital market. At present, both China Mobile and China Telecom have pledged to increase their dividend payout ratio to more than 70% in the future.

It is believed that in the future, operators will seize the strategic opportunities brought about by the new round of scientific and technological revolution and industrial change, increase the development of digital intelligence industry to meet the rapid growth of performance, and continue to share high-quality development achievements with shareholders, customers and society.

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