This China Telecom story raises a bunch of questions:
MII had repeatedly stated that they are targeting 4 licenses for China in the future. Aside from China Telecom, who else would be qualified to receive and use such license? Since the licenses are "free", MII is certainly not going to give them to foreign carriers, right? So regardless of the trial status and the withdrawal possibility, China Telecom should be a shoe in???
This licensing process is also unique in the wireless world. For example, EU is spending billions just to get the license first, then spend billions on infra and wait years before they expect to make a dime. On this time schedule, China Telecom can in theory have a 3G system ready easily by end of next year (when the reported experiment is terminated), have a subscriber base already, work out all the kinks and MAKE MONEY the moment the license is awarded.
Now if we look at the bigger picture, big telecom companies such as China Telecom are needed to form the backbone of the China stock market and economy after WTO. The following is an article on China Mobile and specifically, this new CDR technique. Could the same be for China Telecom next year?
Needless to say, this could be one huge win for QCOM that is not or can not be officially reported for now.
biz.scmp.com
China Mobile in US$13b deal
Purchase of eight networks from parent would extend lucrative coverage to central and northern provinces
HUI YUK-MIN
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China Mobile is discussing a multi-billion dollar deal to buy eight mainland mobile phone networks from its parent.
The mainland's biggest mobile phone operator - with 65.7 million subscribers in October - last night said it was talking with parent, China Mobile Communications, about buying networks in central and northern China.
The company, which has Hong Kong-listed H shares, did not say how much the deal was likely to cost but observers said it could be worth about US$13 billion.
Analysts speculated China Mobile could become the first company to utilise a new fund-raising method designed to enable foreign businesses to tap mainland funds - China Depository Receipts (CDRs).
As an H share, China Mobile is not allowed direct access to mainland markets. CDRs enable foreign companies to sell shares dominated in yuan to Chinese investors.
"The company may explore PRC domestic equity financing, but no financing plan has been finalised at this stage," China Mobile chairman Wang Xiaochu said.
He indicated the company would consider a mainland bond issue as well as using internal financial resources to cover part of the acquisition cost.
Analysts assessed the US$13 billion cost based on an assumption of China Mobile's present valuation of about US$900 per subscriber and the listed company being able to acquire the assets at a 25 per cent discount to market valuation.
In its August interim results the company flagged plans to issue CDRs. Investment bankers said China Mobile wanted to be the CDR trailblazer.
"With a domestic equity offering, China Mobile can remove worries of potential overhang of new share issue in the Hong Kong market," Credit Lyonnaise Securities Asia analyst Stephen Leung said.
The higher valuation in domestic markets, which trade at some 30 to 40 times the price to earnings ratio - double those in the Hong Kong market - would not only support China Mobile's share price but reduce the dilution effect from new shares, he said.
Last night's announcement came as a surprise to analysts, who had not been expecting any acquisition plan to be announced until the second quarter of next year.
They speculated the company wanted to avoid any potential clash with the listing of the mainland's dominant fixed-line operator China Telecom, as well as a possible share offering from rival China Unicom.
China's mobile telecommunications market is seen as the world's largest and fastest growing.
China Mobile already has 13 provincial networks, mainly in the richer coastal provinces. The networks involved in the present negotiations are in Anhui, Hunan, Hubei, Jiangxi, Sichuan, Chongqing, Shaanxi and Shanxi, and together have an estimated 20 million subscribers.
Analysts say the regions represent the most lucrative areas outside the listed company's present range.
Its parent, with some 75 per cent of China Mobile, operates 18 provincial networks with about 35 million subscribers.
That means the planned acquisitions account for nearly 60 per cent of the parent's remaining assets.
China Mobile finished 2.35 per cent lower yesterday at HK$27. |
