Hong Kong gears up for another $10 billion IPO with planned China Tower flotation

HONG KONG (Reuters) - China Tower, the world’s biggest operator of mobile phone towers, has applied to list its shares in Hong Kong in what could become the city’s second $10 billion offering this year.

Slideshow ( 3 images )

The company, formed in 2014 from the towers operations of China’s three state-backed telecoms providers, filed its application for an initial public offering (IPO) on Monday.

The application comes a little more than a week after Chinese smartphone maker Xiaomi filed for an IPO that could also raise as much as $10 billion.

It would be the first time the city has hosted two mega-flotations since 2010, when insurer AIA 1299.HK and Agricultural Bank of China 1288.HK raised $20 billion and $22 billion respectively, Thomson Reuters data shows.

China Tower is expected to seek a valuation of up to $40 billion, according to sources with knowledge of the plans.

The final size of both deals will depend on market mood and investor appetite. Xiaomi is expected to sell its shares in July, while China Tower is aiming to float soon after the summer lull, sources said.

China Tower's IPO is being led by China International Capital Corp (CICC) 3908.HK and Goldman Sachs GS.N.

The company operated 1.9 million tower sites and had 2.7 million tenants at the end of last year. Its operating revenue in 2017 rose nearly 23 percent to 68.7 billion yuan ($10.8 billion), while profit rose more than 25 times to 1.9 billion yuan, the prospectus showed.

The IPO was expected to launch early this year, but was delayed, according to sources, by the difficulties of obtaining all the requisite approvals from state regulators as well as the company's three main state-backed owners - China Mobile 0941.HK, China Telecom 0728.HK and China Unicom 0762.HK.

The three combined their towers in a bid to streamline operations and reduce tower duplication. At the time, China Mobile held 38 percent, China Unicom, 28.1 percent and China Telecom, 27.9 percent. China Reform Holding, a state-owned asset manager, took the remaining 6 percent.

Valuations of some global rivals are high.

U.S.-listed American Tower AMT.N and Crown Castle International CCI.N are trading on about 54 times and 111 times last year's earnings, respectively, according to Thomson Reuters data.

Both are structured as real estate investment trusts - a group particularly prized by investors in recent years for the high dividends they pay.

Telecoms companies around the world have sought to spin out and merge tower operations to cut costs.

India's Bharti Infratel BHRI.NS is in the process of becoming the world's second-largest mobile mast operator by merging its operations with those of Indus Tower, creating a giant with more than 163,000 towers.

Reporting by Jennifer Hughes and Julie Zhu in Hong Kong and Fiona Lau of IFR; Editing by David Goodman and Mark Potter