China Netcom Group Corp. (Hong Kong) Ltd., China's second-biggest fixed line phone company, plans to spend half of the net proceeds from its HK$9.4 billion (US$1.2 billion) initial public offering on expansion and infrastructure, according to documents filed to the Hong Kong Stock Exchange.

Institutional investors will pay between HK$7.88 to HK$9, according to a filing with the U.S. securities regulator. When broking fees are deducted, retail investors in Hong Kong will pay between HK$7.80 and HK$8.91, according to a filing to Hong Kong's stock exchange today.

The company plans to sell 104.6 million shares in Hong Kong, where it is based. It also plans to sell 47 million American depositary receipts, each worth 20 common shares, in New York. China Netcom will set the initial offering price Tuesday and start trading in Hong Kong Nov. 17 under the code of 906.

The company, which has 77.6 million fixed-line subscribers, needs funds to expand its network to boost sales and counter falling phone charges after rivals offered discount packages to win customers.

China Netcom plans to lure investors to the third-biggest Chinese IPO this year with higher dividends and a cheaper price relative to earnings than rivals.

About 50 percent of net proceeds will be used for expansion and net infrastructure, the Hong Kong filing said.

China Netcom provides phone, Internet and data transmission services in the cities of Beijing and Tianjin and the northern provinces of Hebei, Henan, Shandong and Liaoning. It is also expanding in the rich areas of Shanghai and Guangdong province in the south, which are dominated by China Telecom.

China International Capital Corp., Citigroup Inc. and Goldman Sachs Group Inc. are arranging the sale.

(Xinhua News Agency November 8, 2004)