China Unicom buying China Netcom for nearly $24B

The country's No. 2 mobile operator said it would aquire China Netcom Group Corp. Ltd in a share swap valuing the fixed-line operator at 185 billion Hong Kong dollars ($23.8 billion). That represents a 3 percent premium over Netcom's last closing share price.

Separately, China Unicom and its parent said they would sell the code division multiple access, or CDMA, mobile network and accompanying business to China Telecom and its parent for 110 billion yuan ($15.86 billion). China Telecom is the country's biggest fixed-line operator.

The moves were expected as part of a government-mandated shake up of China's telecommunications sector unveiled late last month. That plan called for the country's six telecom companies to combine into three groups in a bid to create a more competitive industry and prevent a dominant operator from monopolizing the market.

The deals could help China Unicom and China Telecom compete with the country's cell phone heavyweight, China Mobile, the world's largest mobile provider by subscribers. China Telecom could expand its new mobile business with its current fixed-line customers; China Unicom could grow its current mobile business with the new fixed-line subscribers.

"China Mobile, as everyone has talked about, would have more competition," said Jackson Wong, investment manager at Tanrich Securities in Hong Kong.

Still, even China Unicom Chairman and CEO Chang Xiaobing suggested that a close rivalry was far off.

Asked at a news conference when his company might surpass China Mobile, Chang grinned.

"It's hard to say when the new company will become the largest mobile operator in China," he told reporters. "Frankly, I still believe there is a significant gap between the new company and China Mobile."

Under the transactions unveiled Monday, each existing China Netcom share will be swapped for 1.508 new China Unicom shares.