China Mobile expands with Paktel deal

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China Mobile is to take its first big step beyond its home markets with the purchase by its state-owned parent of Paktel, the loss-
making Pakistani telecommunications company.

China Mobile Communications, which controls Hong Kong-listed China Mobile, said on Monday that it would buy an 89 per cent stake in Paktel from Millicom International Cellular, the emerging markets telecoms group.

The deal, which requires government approvals but is expected to close next month, implies a valuation for Paktel of $460m. Millicom, which was advised by Lazard on the deal, said total cash payable to it for the stake would be about $284m including debt repayments.

China Mobile has been seeking to expand overseas for at least two years amid a government campaign to push leading Chinese companies to “go global”.

However, the Chinese operator has found it difficult to seal deals, aborting a $5.3bn bid for Millicom itself at the 11th hour last July.

In November Millicom said it was considering selling or even shutting Paktel, citing “challenging business conditions in the Pakistan mobile telephony market and frequency interference issues”.

China Mobile, however, will be able easily to afford the considerable investment likely to be needed to turn Paktel round.

It should also be able to apply some of the marketing approaches that have given it a dominant position in the Chinese market which, like Pakistan, has challeng-
ing geography and high numbers of low-income
consumers.

Paktel will benefit from China Mobile’s huge clout as one of the world’s biggest buyers of telecoms equipment.

Wang Jianzhou, China Mobile chairman, told the Financial Times in an interview in August that its takeover of China Resources Peoples had cut the Hong Kong-based wireless operator’s procurement costs by half.

“One of our advantages is scale. We do central procurement, so our cost is low,” Mr Wang said.

China Mobile continues to grow quickly in its home market, where it is adding millions of subscribers each month. However, it could face new challenges in the next few years as Beijing moves towards the introduction of 3G wireless services.

Beijing’s official Xinhua news agency on Monday quoted industry insiders as saying China Mobile was likely to be issued a 3G licence requiring adoption of technology based on the home-grown TD-SCDMA standard.

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