New | China Mobile targets asset in network push
Takeover of sister firm TieTong for expansion of broadband operations on the cards as the company reports 0.8 per cent drop in first-half profit
China Mobile, which posted better-than-expected earnings in the second quarter, plans to swiftly build up its broadband network operations with the purchase of China TieTong Telecommunications Corp, formerly known as China Railway Communications.
The target company is a wholly owned subsidiary of China Mobile Communications Corp, the parent of Hong Kong-listed China Mobile, and the country's third-biggest fixed-line internet services provider after China Telecom Corp and China Unicom.
At a press conference on Thursday, China Mobile chairman Xi Guohua said the acquisition of TieTong would enable the firm "to obtain quick access to fixed-line broadband core resources, and enhance our operational and managerial efficiency".
Xi described TieTong as "an old state-owned enterprise" with precious assets - including land holdings, branches, subsidiaries and licences - which China Mobile could use to further grow its business.
"Broadband is a huge potential market for China Mobile, so we must have the necessary licences," he said. "Eighteen of the 20 largest telecoms players in the world deliver comprehensive, integrated services."
China Mobile is the world's largest wireless network operator by number of subscribers, which totalled 818.77 million - including 208.81 million 4G users - at the end of last month.
The company also runs the world's biggest 4G mobile network, with 940,000 base stations covering a population of 1 billion at the end of June.
China Mobile said its takeover of Beijing-based TieTong would be a cash acquisition to be completed by the end of this year. The deal's value is yet to be determined.
Bernstein senior analyst Chris Lane and senior research associate Jimmy Chen yesterday said TieTong's net asset value, excluding 11 billion yuan (HK$13.3 billion) in outstanding debts, was 31 billion yuan as of December 31 last year.
"Assuming China Mobile takes on TieTong's debt, then that would be around the price they might pay," Lane said.
China Mobile on Thursday reported a 0.8 per cent decrease in interim net profit to 57.3 billion yuan from 57.7 million yuan in the same period last year, mainly due to the value-added tax reform in its industry.
Revenue in the first half was up 4.9 per cent at 340.73 billion yuan, compared with 324.68 billion yuan previously.
"Despite the impact of regulatory reforms, China Mobile's interim results still showed huge growth in mobile data traffic revenue," Lane said.
The operator saw revenue from mobile data traffic rise 41.6 per cent year on year to 99.28 billion yuan.
The monthly average revenue per user was 62 yuan as 55 per cent of its subscribers were still on its 2G service.
Responding to mainland reports which speculated about the appointment of a new chairman for the company, Xi said he had not received any notice. "I am not due to retire until 2018," he said.
China Mobile's share price reached a high of HK$100.90 in early afternoon trading but finished down 0.25 per cent at HK$98.15.
