BEIJING-Vodafone, the world’s largest mobile-phone operator by total subscriber numbers, is set to take a 2-percent stake in China Mobile (Hong Kong), the listed subsidiary of parent China Mobile Telecommunications in Beijing. Vodafone agreed to purchase shares valued at $2.5 billion in China Mobile (Hong Kong) to gain a foothold in China’s mobile-phone market. China Mobile (HK) will use the money to partly finance the acquisition of seven provincial-level networks.
The Hong Kong company already owns mobile-phone networks in six Chinese provinces and will acquire an additional seven from its parent at a cost of $32.84 billion. The company will issue $22.67 billion of new shares to its parent and pay the remaining $10.17 billion in cash. The parent retains a 75-percent stake in China Mobile (HK). The networks are located in the cities of Beijing, Shanghai and Tianjin, the provinces of Hebei, Liaoning and Shandong, as well as the Guangxi autonomous region.
After the purchase, China Mobile (HK) estimates it will have 55.9 percent of all mobile-phone subscribers in China, up from the current 34.3 percent. The deal is bigger than the takeover by Pacific Century CyberWorks of Cable & Wireless HKT, which was valued at $28 billion in August.
Vodafone has indicated its intention to raise its stake to between 10 percent and 15 percent after China enters the World Trade Organization (WTO). Upon accession, foreign firms will be allowed to hold a 25-percent stake in Chinese operators, increasing to 49 percent after three years. China Mobile and Vodafone will together explore suitable opportunities for joint ventures and strategic alliances.
China Mobile stands to learn from Vodafone’s management experience to improve its competence in the market ahead of increased competition, following the country’s accession to the WTO and to prepare for forays on the world market.
Following the deal, Hong Kong tycoon Li Ka-shing has a stake in China’s two mobile operators. Li’s Hutchison Whampoa invested US$400 million in China Unicom in May and holds a 2.5-percent stake in Vodafone.
NTT DoCoMo and Deutsche Telekom are also interested in buying stakes in China Mobile.
