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Chinese mobile infrastructure provider to list on ASX

China's Enice has announced an IPO to list on the ASX in order to fuel its global expansion in the telco infrastructure sector.
Written by Corinne Reichert, Contributor

Chinese telecommunications infrastructure provider Enice has announced its intention to list on the Australian Securities Exchange (ASX) through an initial public offering (IPO).

Enice (Electronics Network Information of Century East) has been operating for 15 years in China, building and providing telcos with wireless technologies and supporting services.

The company said it hopes to raise between AU$25 million and AU$38 million in its IPO, which will aid it to develop new technologies and sell them within China as well as globally. The company said Chinese telco market revenues are projected to grow from AU$22.24 billion last financial year to over AU$79 billion by FY2019.

"The IPO presents investors with a rare opportunity to participate in China's burgeoning wireless telecommunications industry. The sector is undergoing an unprecedented period of growth driven by rapid urbanisation and the Chinese government's twelfth 'Five Year Plan' to modernise mainland China," said Yongjun Shen, chairman of Enice, on Wednesday morning.

Enice also said it has Drew Kelton, the former managing director of Telstra International, as a board member, and claims it is already in talks with Australian telcos to bring its services to the country.

"The IPO will fund a new phase of growth for Enice as we seek to expand our operations initially in China and Hong Kong, while also capitalising on opportunities for international expansion in North America and make further investment in R&D into our antenna manufacture capabilities for the broader international market," Enice CEO Wei Yu said.

The company currently counts China Mobile, China Unicom, and China Telecom among its clients, and is banking on maintaining its revenue growth thanks to the global shift from voice-based services to 4G data-based services.

"Enice is strategically positioned to capitalise on the significant structural shift currently under way in China's telecommunications sector. This is being driven by a range of factors, including regulatory and economic stimulus initiatives by the Chinese government, such as the granting last year of full 4G licences to China's three mobile operators, and the rapid growth of China's mobile population, which is now the world's largest, with more than 1.29 billion users," said Yongjun Shen.

"Globally, the switch from voice-centric to data-centric business models is placing significant pressure on incumbent mobile networks. This has sparked a new wave of investment in wireless network construction and technology to support this growth, with smartphone data traffic expected to account for 75 percent of all mobile traffic within five years."

In March, China Mobile reported a drop of 1.5 percent in telecommunications services revenue as of the end of 2014, but it also experienced a surge in its data business of 22.3 percent, to 253.1 billion yuan year on year. Its overall profit dropped by 10 percent to 109.3 billion yuan -- the biggest drop since 1999 -- due to its significant investment in network development. The company added almost 40 million new customers in 2014, though, and as of the end of Q1 2015, China Mobile was the world's largest mobile provider, with 633 million devices subscribed to its services.

China Unicom, on the other hand, lost 10 million mobile customers over the five months to June 2015, while China Mobile acquired 861,000 new users and China Telecom added 760,000 over the same period.

This worldwide shift from voice to data has also recently spurred telcos in Australia and Singapore to announce the shutdown of their 2G networks.

"Today, the majority of mobile customers are on 3G and 4G networks; only an extremely small percentage of customers remain on 2G-only mobile devices," Singapore's three major telcos, Singtel, StarHub, and M1, said in a joint statement in June.

"We have seen steep declines in the number of customers on 2G to the point where today 2G traffic accounts for less than 1 per cent of our total network traffic [and] we have not sold a 2G phone for several years," Telstra's group managing director of networks Mike Wright said in July last year.

Enice's IPO is offering 95 million CDIs priced at AU$0.40 per CDI, and is open from August 19 until September 18. The company is expected to begin trading on the ASX as of October 2.

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