China Telecom to relaunch huge IPO

Insufficient investor demand may force price cut

HONG KONG (CBS.MW) -- China Telecom, hoping to raise as much as $3.68 billion from the sale of more than 20 percent of the company in New York and Hong Kong, has postponed pricing its IPO until next week after failing to draw sufficient demand from fund managers, people close to the deal said Thursday.

The delay shows that the bruising of telecom companies in the worst bear market in years is hardly over.

It also raises the possibility that the price of China Telecom's 16.8-billion-share initial public offering could be cut, assuming regulatory approval in Beijing, Hong Kong and the U.S.

The company, which is the overseas listing vehicle for China's largest fixed-line telecom operator, had set a price range between HK$1.48 and HK$1.71. Even at the lower end of the range, the deal was set to be and the world's third-largest IPO so far this year and Asia's biggest

It doesn't appear there's much room for cutting the IPO price to woo institutional investors: HK$1.48 is just a few pennies above China Telecom's book value, and Beijing doesn't allow state firms to be sold to the public at less than book value

Alternatives could include cutting the size of the offering or hiking the dividend yield, analysts said

A person familiar with the transaction said the deal would be relaunched "no later than early next week."

China Telecom had planned to announce pricing details of the dual listing today. Trading was originally slated to start in New York on Nov. 6 and in Hong Kong on Nov. 7