By intern reporter Ben Yue

China Netcom Group Corp. Ltd. (HKSE: 00906) is set to withdraw its shares from the Hong Kong exchange October 15 while preparing to merge with China Unicom Ltd. (HKSE: 00672) as part of a reshuffling of China’s telecom industry.

A delisting of China Netcom’s American depository receipts (ADRs) on the New York Stock Exchange is expected that same day.

According to China Unicom, the takeover of China Netcom will be implemented through a share swap. After the merger, the new company will be named China Unicom (Hong Kong) Ltd.

The company said each China Netcom share will be swapped for 1.508 new China Unicom shares on the Hong Kong bourse, while each ADR will be exchanged for 3.016 new, China Unicom ADRs.

Based on China Unicom’s share price of HK＄ 18.48 before trading was suspended May 23, the total value of the transaction is expected to exceed HK＄ 439 billion.

The president of China Unicom, Chang Xiaobing, said a shareholder meeting in September will include a vote on the merger plan.

Under the industry reshuffle launched by the Chinese government in June, China Netcom will become China Unicom’s wholly owned subsidiary. China Unicom plans to invest 15 billion yuan over the next three to five years to upgrade Netcom’s broadband business.

It’s widely believed that China Unicom will get a third-generation (3G) wireless services license to operate the Wideband Code Division Multiple Access business after the reshuffle. China Unicom said it expects 3G to account for one-third of its customer volume. The company is prepared to invest 100 billion yuan in the 3G business over the next two years.

Based on the latest statistics from the companies, the new China Unicom will have 260 million customers, including more than 100 million GSM mobile users, 100 million fixed-line clients and around 20 million broadband customers.

1 yuan = 14 U.S. cents