BEIJING, May 5 (Reuters) - Entrepreneur Wang Jing is little-known outside China, but the turnaround of his core telecoms business shows he is a well-connected figure among the Beijing elite.
Wang's key company, Beijing Xinwei, was started in 1995 as a joint venture between China Academy of Telecommunication Technology and Cwill Telecommunications, a U.S. entity set up by former Beijing Xinwei president Chen Wei.
The company helped develop China's first homegrown wireless technologies, including the mobile communications standard, TD-SCDMA. But by 2010, Beijing Xinwei was foundering, with reported revenue for the year of 133.8 million yuan ($21.56 million) and net profits of 3.27 million yuan ($526,900).
Wang said he was contacted by a friend, Wang Qinghui, who in 1999 became an early investor in the firm through his venture firm, Bonanza Investment Group Ltd.
Bonanza also had joined forces with State Grid Corp, China's central government-controlled power grid operator, to invest in FibrLINK Communications Co, a networking solutions firm, with the aim of listing shares on the Hong Kong stock market. That deal fell through in 2006.
Wang initially helped Bonanza raise 130.8 million yuan to finance subscription of 120 million new shares, with 88 million shares later placed in his name. "I invested in Xinwei with my own money, without the help of friends or family," he said.
Since Wang's arrival, Beijing Xinwei has made a sharp rebound. The company has gained vendor certifications from the General Armament Department of the People's Liberation Army and the State Commission of Science and Technology, allowing it to sell equipment and services directly to the Chinese military and law enforcement.
It continues to build public telecom networks, along with private networks for oilfields, power grids and transport.
KEY ENTERPRISE DESIGNATION
Beijing Xinwei is clearly well-regarded by the Chinese leadership. Five central government ministries, including the National Development and Reform Commission, the Ministry of Industry and Information Technology and the Ministry of Finance, jointly designated the company a key software enterprise for stat planning, giving it a preferential corporate income tax rate.
In 2011, the China Development Bank also granted Beijing Xinwei a 12 billion yuan ($1.92 billion) line of credit to support the company's "going global" strategy.
In the last three years, Beijing Xinwei has inked global deals to build telecoms networks in Myanmar, Cambodia, Ukraine, and Nicaragua. The Cambodia project, which is rolling out a mobile network and wireless services through Xinwei's local subsidiary CooTel, involves a 2.2 billion yuan credit guaranteed by China Development Bank, along with an 800 million yuan U.S. dollar credit facility. The Ukraine project uses financial guarantees from China Construction Bank of up to $412 million.
"Xinwei has gained the government's trust, and some government support, but this is entirely because Xinwei's technology is advanced and, more importantly, because Xinwei's technology is the intellectual property of a Chinese company," said Wang. "If Xinwei were a U.S. company it would receive the same kind of support from the U.S. government."
By 2012, Beijing Xinwei reported operating income of 915 million yuan ($146.33 million) and net profits of 491 million yuan. The company said 2013 operating revenues reached 2.36 billion yuan ($377.42 million), producing net profits of 1.71 billion yuan.
Last September, Beijing Xinwei and Beijing Zhongchuang Telecom Test Co, a Chinese maker of network testing devices, announced their intention to undertake the biggest reverse takeover in Chinese stock market history.
The deal, which may be finalised before the summer, now calls for Beijing Xinwei to inject 95.61 percent of its shareholding, valued at 22.49 billion yuan, into Beijing Zhongchuang, in exchange for 2.61 billion new shares. The listed firm will also raise 4 billion yuan to support new projects and settle some high-interest loans.
At the deal's close, Beijing Xinwei shareholders will have an 80 percent stake of the listed firm; Wang Jing himself will hold 30.91 percent.
Wang and his colleagues have added a sweetener, offering their own shares in the combined firm to guarantee that profits for Beijing Xinwei's underlying assets will rise from 2 billion to 2.73 billion yuan over the next three years, according to a March 25 filing.
Beijing Zhongchuang shares, which spiked 185 percent in the month following the takeover announcement, have since shed 40 percent.
"My special contribution has been hard work," said Wang. "I arrived at Xinwei 4 years ago, and since then I haven't rested. I eat and live at the office. My life is about work." ($1 = 6.2530 Chinese Yuan)
(Reporting by Matthew Miller; Editing by Alex Richardson)