China Mobile Communications owns 75% of NYSE and HK-listed China Mobile. China is the worldÆs largest cell phone market measured in terms of number of users and China Mobile is at the forefront of that revolution with the worldÆs largest mobile subscriber base. It provides mobile telecommunications and related services in 31 provinces in mainland China.
With the Paktel deal, China Mobile is buying into a high-growth region û the number of mobile phone subscribers in Pakistan had grown to 46 million by the end of 2006, which still represents an estimated penetration of only about 30% of the population.
The deal follows China Mobile's failed attempt to take over Millicom last year. In January 2006, Millicom announced that it had received unsolicited approaches to buy the company and had appointed Morgan Stanley to oversee the process. In May, China Mobile was reported to be the frontrunner in the process with a rumoured offer of $5.3 billion for the Swedish company. The deal was aborted in July due to valuation differences, according to sources. At the time, Millicom issued a press release saying that ôthe purchaser is not in a position to make a binding offer that is suitably attractiveö. That deal would have been the largest overseas acquisition by a Chinese company.
This is also the second attempt by China Mobile to gain direct entry into Pakistan. It was in the fray for Pakistan Telecommunication Company which was ultimately won by Emirates Telecommunications (Etisalat).
Paktel is the fifth-largest cellular player in Pakistan, operating in Pakistan since 1990. Millicom announced in November it would review options for the business, including a complete exit, as the business was not meeting its ROI requirements.
Commenting on the sale, Marc Beuls, Millicom's chief executive officer, says: ôThe implied enterprise value of $460 million reflects fair value for the business. The sale of Paktel allows Millicom to focus on the 16 markets where we have already established strong market positions and, with penetration rates rising rapidly, the prospects in these businesses are good.ö
Analysts had commented last year that the Millicom takeover was very attractive for China in the long term because it provided an opportunity for Chinese telecom equipment and handset providers to get a foothold in MillicomÆs markets. Further, the talent pool of engineers and designers of China Mobile could be deployed to upgrade MillicomÆs networks. The takeover of Paktel, though on a much smaller scale, should also provide the Chinese company with similar opportunities û and perhaps whet its appetite to seek another mega deal. Shareholders welcomed the move as China Mobile gained on both bourses on which it trades.
Merrill Lynch and CICC represented China Mobile on the buy side. Lazard represented Millicom on the sale.
¬ Haymarket Media Limited. All rights reserved.
