Under mainland rules, China Mobile Communications Corporation (CMCC), China Mobile Hong Kong's mobile TV arm, would need to report major equity deals to both its central government-owned parent and the state-owned assets regulator for approval, say some experts.
These rules may complicate the deal between CMCC and Ricky Wong Wai-kay's Hong Kong Television Network (HKTV) if relevant approval had not been sought as required.
HKTV announced on December 20 that it had paid HK$142 million to acquire CMCC, which holds broadcast spectrum and a unified carrier licence that allows the licensee to offer mobile television services.
China Mobile said in a statement on Sunday that it would launch an internal investigation to see whether the deal complied with the parent company's internal management rules and state regulations.
The State-owned Assets Supervision and Administration Commission (SASAC) of the State Council stipulates that overseas units of a state-owned enterprise (SOE) must report major deals - including mergers and acquisitions (M&As), asset sales and equity investments - to the parent company.
Any sale of state assets planned by an SOE's major overseas unit that would cause the unit to lose its status as a state-owned or state-controlled entity also requires SASAC approval.
A SASAC spokesman was not available for comment.
A Beijing-based legal expert advising M&A deals told the South China Morning Post that mainland authorities have been "quite prudent" in approving major acquisitions in the telecoms industry and granting licences for value-added telecom services to overseas companies.
The expert, who declined to be named, confirmed that an overseas transaction like China Mobile's would need first to get the green light from both the parent company and relevant government departments.
"Such preconditions are usually included in transaction contracts. If they are not met, the validity of the deals might be challenged," she said.