From the course: Running a Profitable Business: Revenue Recognition

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Valuing a Chinese state-owned telecom company

Valuing a Chinese state-owned telecom company

From the course: Running a Profitable Business: Revenue Recognition

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Valuing a Chinese state-owned telecom company

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- To illustrate the usefulness and meaning of the price-to-sales ratio, let me show you a little case that we do in our financial reporting classes. This case is based on an interesting event in China in 2008. First, some background. The large telecommunications companies in China are majority-owned by the Chinese government. As a result, they are called state-owned enterprises, or SOEs. In early 2008, there were six large state-owned telecommunications companies in China. The Chinese government decided to restructure the industry, creating three companies out of these six. The restructuring was designed to create three large competitors, each with a large base of both mobile phone customers and old legacy fixed-line customers. An interesting element of this restructuring was that one of the companies, China Unicom, was buying another Chinese SOE, China Netcom. The price was set at 165 billion yuan, the Chinese currency. Now at first you might think it doesn't matter what the price…

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