A $5.3bn bid by China Mobile for Millicom International Cellular, which would have been the largest overseas acquisition by a Chinese company, fell apart on Monday as the emerging markets telecoms operator said it had been unable to agree terms with its suitor.

Shares in Millicom plunged by 26 per cent in New York on Monday, after the group said it had concluded that the state-owned Chinese operator “[would] not be in a position within an acceptable timeframe to make a binding offer that is suitably attractive …or sufficiently certain of closing.”

Millicom’s decision to end the sale process came after China Mobile had conducted weeks of due diligence on a $48-a-share bid.

Advisers had hoped a deal could be finalised as early as a month ago, but negotiations dragged on, sapping the Luxembourg-based company’s confidence in China Mobile’s ability to complete a transaction. The deal’s collapse, just as Millicom’s advisers were about to board flights for Beijing to wrap up the final details, could affect foreign companies’ willingness to pursue similar transactions with state-owned Chinese groups.

Beijing has encouraged overseas expansion by leading state companies with the aim of creating companies able to compete with multinationals.

It is the second rebuff to China Mobile’s international ambitions in a year. The group bid last year for a stake in Pakistan Telecommunications but lost out to Emirates Telecommunications.

Some analysts had expressed concern that the Millicom deal could prove too rich for China Mobile – which through its Hong Kong-listed subsidiary is the world’s largest mobile operator with a claimed 264m subscribers – or might distract the company from restructuring in its home market.

Millicom on Monday said: “The board of directors remains confident in the independent future of the company.”

Kinnevik, the Swedish investment company that owns just under 40 per cent of Millicom’s shares, also said it supported the decision to end talks. Kinnevik’s B shares closed down 16.67 per cent at SKr73.75.

Nasdaq-listed Millicom – with more than 9m subscribers in 16 countries in Asia, Africa and Latin America – put itself up for sale in January after receiving approaches from rivals looking for growth in emerging markets.

China Mobile shares in Hong Kong were down 0.11 per cent at HK$44.70 by Tuesday midday.

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