It was recently announced that SK Telecom, one of South Korea's leading mobile operators, will buy $1 billion of China Unicom bonds. As the world's second largest mobile operator, China Unicom should have all the leverage they need to negotiate favorable partnerships with other telcos worldwide. Foreign operators, meanwhile, are salivating over the growth potential of the China market and have been scratching at any opportunity to work with either China Mobile or China Unicom. It is curious to see, then, that China's operators continues to sell company stakes to foreign operators. We have seen this with China Mobile and Vodafone, China Telecom and PCCW, China Unicom with Telefonica and most recently SK Telecom. By diluting ownership, Chinese operators are giving up their leverage. What is the cause of this?
One theory is that Chinese operators are getting ready for the huge CAPEX required for 3G buildup and rollout by selling stakes of the company as a method of capital infusion. Continual government delays and policies about pushing 3G into a market that cannot support it and doesn't demand its services are possibly hurting the domestic telco industry more than it's helping it.
