China Mobile Communications Corp. is near a $5.3 billion pact to acquire
Millicom International Cellular SA of Luxembourg, operator of mobile-telephone
services in many of the world's poorest nations, in a move that would expand
China's influence into international telecommunications, especially in emerging
markets.
The expected deal -- the biggest overseas acquisition by a Chinese company --
could also have a ripple effect on Chinese suppliers of telecom equipment and
mobile handsets such as Huawei Technologies Co. and ZTE Corp. China Mobile is
expected to upgrade the network of Millicom, which operates in 16 countries.
A Chinese woman talks
on her mobile phone outside a China Mobile office in Beijing March 17,
2006. The company is reportedl near a $5.3 billion pact to acquire
Millicom International Cellular SA of Luxembourg.
[Reuters] |
Gao Songge, deputy director of the General Department of China Mobile, said
that "the talks are still going on. ... There's no news for disclosure for now."
A spokesman for Millicom declined to comment.
The deal, which could be signed within days, is the latest sign of Chinese
companies' ambitions in snapping up international assets. After watching Western
companies invest billions in their home market, Chinese companies in recent
years have been looking at purchases abroad, most notably with Lenovo Group
Ltd.'s purchase of the personal-computer division of International Business
Machines Corp. For China's government, the expansion of Chinese companies
overseas is part of a broader push to expand the country's global influence.
But Chinese oil company Cnooc Ltd. last year failed in its high-profile $18
billion bid to take over Unocal Corp. after opposition to the deal from
Congress. That led to great frustration in China, and Chinese companies
increasingly are looking instead toward the world's faster-growing emerging
markets.
State-owned oil company CNPC International Ltd. last year paid $4 billion for
Petrokazakhstan Inc., which controls oil fields in Kazakhstan. Other recent
Chinese deals have been completed in Nigeria, Ecuador and Peru, and more are
being sought in Russia and Sri Lanka.
China Mobile plans to leverage its access to inexpensive and plentiful
engineers, designers, contractors and others needed to build new Millicom
networks, or to upgrade existing networks in its far-flung locales, according to
people familiar with the matter.
Emerging markets represent a particularly attractive market for telecom
companies as Western markets become saturated. In many developing nations, the
fixed-line infrastructure is poor and limited in its range, so cellular
networks, which are cheaper to roll out than traditional lines, are used as the
primary means of communication.
China Mobile has built one of the most extensive national cellular networks
in the world, covering all of mainland China. With more than 250 million
wireless customer accounts as of last month -- all in China -- China Mobile is
by far the world's biggest wireless carrier and controls about two-thirds of the
mobile market in China.
China Mobile is owned by China's government. The company owns about 75% of
China Mobile (Hong Kong) Ltd., which is listed in Hong Kong and on the New York
Stock Exchange.
Nasdaq-listed Millicom would be China Mobile's first overseas acquisition.
China Mobile is in the final stages of inking an agreement to buy Millicom for
$48 a share in cash, according to people familiar with the situation. The deal
still hinges on several layers of administrative approvals in China and will be
contingent on the Chinese company receiving at least 75% of Millicom's shares.
Millicom's shares rose $1.24 to $45.04 in 4 p.m. Nasdaq Stock Market trading.
Millicom is about 40%-owned by Investment AB Kinnevik, a Swedish
family-controlled holding company, and a private Swedish trust.
The deal would give China Mobile, which has so far operated only as a
domestic company, experience owning a multinational concern. Millicom's
executive team is known in the industry as a group with a particular savvy at
selling cellphones and building networks in often-inhospitable environs in Asia,
Africa and Central America.
Millicom reported a 16% rise in subscribers for the first quarter and a
profit of $33.4 million, compared with a loss of $11.3 million a year earlier.
The company, with about 10 million subscribers, said revenue rose 20% to $322
million, compared with the year-earlier period.
