Vodafone to invest $2.5bn in China Mobile
By Michiyo Nakamoto in Tokyo and Joe Leahy in Hong Kong
Published: October 4 2000 08:32GMT | Last Updated: October 4 2000 11:11GMT
Vodafone, the world's largest mobile phone group, on Wednesday said it had agreed to form a strategic alliance with China Mobile (HK), China’s largest wireless carrier, and would pay US$2.5bn cash for new shares in the company.
Vodafone said the investment was aimed at financing China Mobile's plan to acquire seven major mainland cellular networks from its mainland parent company, China Mobile Communications Corporation.
China Mobile said on Wednesday that it would pay US$32.84bn for the networks and assume US$1.2bn of debt. It said it would issue shares worth US$22.67bn to its parent to pay for most of the acquisition.
The acquisition of the networks translates to about US$2,300 per subscriber.
The Chinese government and China Mobile met on Tuesday with representatives from the world’s leading mobile operators and chose Vodafone as a strategic partner over other carriers including Japan’s DoCoMo and Germany’s Deutsche Telecom, industry and banking sources said.
The deal gives Vodafone a toehold in China, which is already the second largest market in the world with 60m subscribers. The market is expected see strong growth as penetration is still only about 5 per cent.
It is understood that China Mobile opted for one partner to make the negotiations less complicated going forward. "It came down to the international status of Vodafone and for the amount of money they were willing to put up," said one banking source.
However, he cautioned that the deal did not provide Vodafone with any special rights.
"This is nothing much more than an entry ticket," the banker said. "There is no joint venture agreement."
Under the terms of the strategic alliance, Vodafone and China Mobile will co-operate on mobile services, technology, operations and management. The companies said they would separately explore other opportunities for joint ventures and equity-based strategic alliances.
The deal is a blow to DoCoMo, which had been looking to enter the promising Chinese market. DoCoMo has been actively investing in overseas partners as a means to spread the use of W-CDMA technology. A decision by China Mobile to adopt the competing CDMA2000 third generation standard that is expected to be most widely adopted in the US, would be a serious setback for DoCoMo in the neighbouring market. |
