China Motion Telecom International has proposed paying 276 million yuan (about HK$258.75 million) for a stake in its mainland partner's long-distance call business. Hong Kong-listed China Motion yesterday said it would buy an effective 45 per cent stake in CM Netcom, a company that provides voice over Internet protocol (VoIP) related services in Beijing and Shanghai. CM Netcom is currently 100 per cent-owned by Shenzhen Motion. The transaction would be the first joint venture between China Motion and long-time partner Shenzhen Motion after China promised to gradually open its telecommunications market following entry into the World Trade Organisation. No foreign company is allowed to own a majority stake in a mainland telecoms joint venture. 'This acquisition will assist the group in becoming one of the first movers to directly penetrate the fast-growing and lucrative [mainland] telecoms market,' China Motion said. The acquisition would also allow China Motion to participate in the operation, development and expansion of VoIP-related services, the company said. CM Netcom generated 18.05 million yuan in revenue in the 10 months to October, with a 4.43 million yuan loss. In 2001, it recorded 4.59 million yuan in revenue with a loss of 4.83 million yuan. The operation had net tangible assets of 32 million yuan, with an asset base of 138 million yuan. China Motion is paying a hefty premium to play the mainland market. 'The acquisition will benefit the group [China Motion] and its shareholders as a whole,' the company said. But VoIP-related services had yet to turn a profit, it said, and the acquisition represents a premium of about 260 million yuan - or 16 times the net tangible assets being acquired. China Motion plans to complete the acquisition in two phases. First, through a 90 per cent-owned vehicle, it will pay 52 million yuan in cash and 86 million in accounts receivable to acquire a 25 per cent stake. At a later stage, it will offset 138 million yuan in loans to CM Netcom to raise its effective stake to 45 per cent. CM Netcom requires a capital expenditure of HK$200 million before the end of March this year. Shares in China Motion were unchanged yesterday at 39.5 HK cents, with no volume recorded. Last month, the company won a licence to enter Hong Kong's fixed-line market.