(Yicai Global) June 24 -- Shares of listed subsidiaries of Potevio Group and China Electronics Technology Group jumped after the Chinese telecoms equipment maker was given the go-ahead to become part of CETG.

Gci Science and Technology [SHE: 002544] and Chengdu Spaceon Electronics [SHE: 002935] were among the listed units to gain in trading today.

The State-owned Assets Supervision and Administration Commission approved Potevio’s incorporation into CETC as a wholly owned subsidiary, according to a notice posted on the SASAC’s website yesterday. They are two of China’s largest state-owned enterprises in the electronic information sector.

Beijing-based Potevio and CETC were previously central enterprises under SASAC’s direct supervision. Potevio will no longer be directly regulated by SASAC after the merger.

Listed companies under Potevio announced in February that a merger and restructuring was under way. China Galaxy Securities estimated at the time that the merger involved 15 listed firms collectively worth more than CNY640 billion (USD9.8 billion).

Gci Science, a telecoms network service provider under CETC, surged by the 10 percent daily trading limit to close at CNY14 (USD2.20). Chengdu Spaceon Electronics, whose controlling shareholder is also CETC, ended 4 percent higher at CNY22.57. The broader Shenzhen Component Index fell 0.4 percent.

Ptevio’s Eastern Communications [SHA: 600776] lost 3.1 percent to CNY13.08 (USD2.02), after earlier soaring by as much as 8.8 percent. The Shanghai Composite Index ended flat.

SOE Mergers

In recent years, the SASAC has cut the number of state-owned enterprises through mergers and reorganizations, with the aim of achieving centralized use of resources and reducing the loss of efficiency caused by horizontal competition.

The SASAC has cut the number to 97 from 106 in the past 5 years. That will drop to 96 after the Potevio-CETC merger is completed.

In a research note, Avic Securities said Potevio and CETC are both large central enterprises in the communications sector, especially CETC, which has a dominant position in the domestic fields of military electronics and network information. The restructuring will further strengthen CETC’s advantages in scale, technologies and the market, it added.

CETC was set up in 2002 by incorporating 46 scientific research institutes and 26 enterprises under the former Ministry of Information Industry. It has 11 affiliated listed companies and more than 200,000 employees.

Formerly known as China Posts and Telecommunications Industry Corporation, Potevio was transformed into a central enterprise in 1999 through institutional reform. It has four listed companies, with about 20,000 employees.

Editor: Peter Thomas