Shanghai. December 30 - China's government-run social security fund will invest in Datang Telecom Technology Co. Ltd. (Datang Telecom) in return for a shareholding, state media reported on Dec. 30.
The National Council for Social Security Fund signed a strategic investment agreement with Datang Telecom Technology and Industry Group (Datang Telecom Group) on Dec. 29. Under the agreement, the social security fund will hold an undisclosed amount of shares in Datang Telecom Group's listed arm Datang Telecom, Xinhua news agency reported on Dec. 30.
Neither the specific investment amount nor the share proportion was revealed in the report. However, Chinese media previously reported that the social security fund will invest RMB 3 billion ($439.12 million) to obtain a 20 percent stake in the Shanghai Stock Exchange-listed Datang Telecom. Representatives from the National Council for Social Security Fund and Datang Telecom were unavailable for comment on Dec. 30.
Huang Shuhe, deputy director of the State-owned Assets Supervision and Administration Commission, was cited in the report as saying the social security fund's strategic investment will facilitate Datang Telecom's research and development capability in Chinese homegrown 3G TD-SCDMA technologies and products.
Dai Xianglong, chairman of the National Council for Social Security Fund, said that the pension fund will purely invest in Datang Telecom and will not interfere with the company's daily operation and management, according to the report.
China's social security fund was founded in 2000 by the State Council, in an attempt to guarantee growth of the social security fund through investments. As of the end of November, the social security fund has invested RMB 64.9 billion ($9.5 billion) in a number of Chinese commercial banks and China's government-run projects, as well as some private-equity funds, the report said.
Datang Telecom also announced on Dec. 30 that it will raise RMB 459.75 million ($67.3 million) through a private placement of up to 5.29 million shares. Its controlling shareholder, the Ministry of Industry and Information Technology's (MIIT) Research Institute of Telecommunications Technology will subscribe to at least 10 percent of the new shares.
According to the announcement, the funds will be used in three research and development projects for 3G smartcards, EMV (Europay, MasterCard and VISA) standard-based IC cards, and TD-SCDMA date service technologies and products. The three projects will require investment of RMB 96.01 million ($14.05 million), RMB 191.72 million ($28.06 million) and RMB 172 million ($25.18 million), respectively.
The Datang Telecom generated total revenue of RMB 2.18 billion ($319.1 million) in the first three quarters of 2009, up 26 percent year-on-year. Its net profit surged 103.56 percent on an annual basis to RMB 68.13 million ($9.97 million) within the period.
Datang Telecom suspended share trading on Dec. 29, due to a shareholder conference.
