The New York Stock Exchange (NYSE) said it started the delisting proceedings against China Telecom Corp Ltd. for its links with the Chinese military.
The United States Federal Communications Commission revealed that China Telecom is owned by the Chinese government and China’s Communist Party has “substantial control” over the company.
As a result, China Telecom will be suspended from trading between Jan. 7 and Jan. 11.
China Telecom, which has 40-percent stake in Dito Telecommunity, the third telecom player in the Philippines, is one of the "Big Three" providers in China, offering wireline mobile telecommunications and internet access, according to a U.S. Senate report issued in June.
The company served more than 335 million subscribers worldwide as of December 2019 and claims to be the largest fixed-line and broadband operator in the world, according to the report.
FCC Chairman Ajit Pai said that aside from the ownership issue, security agencies contend that China Telecom has not complied with cybersecurity and privacy laws, and provides opportunities for Chinese state-sponsored economic espionage and disruption of U.S. communications traffic.
The FCC last year barred the use of U.S. subsidies in purchasing communications equipment from ZTE Corp. and another China-controlled telco. Both companies denied the commission’s allegations that they are security risks.
Since then, Congress and other agencies have branded Chinese companies a threat, “so today, we establish ‘rip and replace’ rules” covering equipment removal,” Pai said.
In April , the FCC told China Telecom to explain why the agency shouldn’t move to revoke their authorizations.
China Telecom Americas in a June 8 filing told the FCC it’s an independent business based in the U.S. and isn’t subject to Chinese government control. It called for a hearing if the FCC were to move against it.
Yet the FCC agency seems set to continue considering national security restrictions, said Commissioner Michael O’Rielly, a Republican who is departing the agency after his term expired.
“We are closing our market in our national security interest,” O’Rielly said. “And it has ramifications and repercussions, but we still have to do it because it’s the right thing.”
In response, China’s Ministry of Commerce said on Jan. 2 that the country would adopt necessary actions to protect the rights of Chinese companies and hopes the two countries can work together to create a fair, predicable environment for businesses and investors.
China Telecom has separate listings in Hong Kong. It generates the entirety of its revenue in China and has no meaningful presence in the U.S. except for it listings there.
Its shares are also thinly traded on the NYSE compared to its primary listings in Hong Kong, making the delisting more of a symbolic blow amid heightened geopolitical friction between the U.S. and China.
U.S. President Donald Trump signed an order in November barring American investments in Chinese firms owned or controlled by the military, in a bid to pressure Beijing over what it views as abusive business practices. The order prohibited U.S. investors from buying and selling shares in a list of Chinese companies designated by the Pentagon as having military ties.