Vodafone deal may bolster China Mobile share price
(Adds analyst comments)
HONG KONG, Feb 26 (Reuters) - China's No. 1 cellular phone operator China Mobile (HK) Ltd may see its embattled share price bolstered if it seals a strategic alliance with British telecoms giant Vodafone Group Plc (LSE: VOD.L - news) .
"It should be perceived as positive by the market," said Edison Lee, an analyst at Credit Lyonnais Securities Asia.
A spokesman for China Mobile said on Monday that the two companies were in talks to finalise a deal struck last October.
The talks, if successful, would prevent Vodafone from selling its two percent stake in China Mobile for another six months beyond the current May 1 lockup expiration date.
"The discussion is making good progress, and to the satisfaction of both parties," the spokesman said. "The company has confidence in achieving an agreement before the end of February."
China Mobile stock, which was traded at HK$42.60 on Monday, has pulled back since hitting HK$50.50 on February 1, and has seen its 18 percent January gain completely wiped out. It has lost about 28 percent in the last 12 months, largely on the back of a global slide in telecommunication stocks and concern over its earnings outlook.
The companies have not revealed details of what the alliance would entail.
But market watchers said news of a definitive deal would support China Mobile's share price, not only because Vodafone would be prevented from unloading China Mobile shares for another six months, but also by holding out the possibility of another avenue for growth.
A BROADER AGREEMENT
Parts of the expected deal could include licencing agreements, management cooperation and human resources exchange, analysts said.
ABN Amro analyst Joe Locke said he hadn't ruled out the possibility that Vodafone -- which is poised to raise its stake in Japan Telecom to 25 percent from 15 percent share -- might take a further stake in China Mobile.
"You have potential for a broader agreement with Vodafone, which would also be positive for sentiment, and which could also affect fundamentals," Locke said .
Credit Lyonnais' Lee suggested that the firms might announce plans to work together to provide mobile data content.
Lee noted that China Mobile shares are vulnerable to global sentiment against telecoms stocks, which have been devastated since valuations began sliding last year.
"Whether the share price is going to react positively really depends on the global backdrop," Lee said.
In October, when Vodafone bought US$2.5 billion worth of China Mobile stock, it agreed to develop a strategic alliance with the Chinese firm.
According to the agreement, if the two firms could iron out a strategic alliance by the end of February, then Vodafone would extend its lock-up period -- which prevents it from selling its 406 million China Mobile shares -- to November 1, from an original expiration date of May 1, the spokesman said. |
