China Mobile Communication Corp (CMCC) yesterday announced its takeover of Pakistan's mobile phone firm Paktel Ltd for $284 million, marking its first major overseas acquisition.

 

Under the deal, CMCC, the parent of Hong Kong-listed China Mobile Ltd, agreed to acquire an 88.86 percent stake in Pakistan's fifth-largest mobile operator from Luxembourg-based Millicom International Cellular SA.

 

The acquisition followed CMCC's abortive bid last year for Millicom, which controls mobile networks in 16 countries across Latin America, Africa and Asia. The deal was estimated at $5.3 billion and would have potentially represented the largest overseas acquisition by a Chinese company.

 

Marc Beuls, president and chief executive officer of Millicom, said in a statement that Millicom chose to sell Paktel to CMCC after a number of parties showed "strong interest"; and that the deal would enable Millicom to "focus on the 16 markets where we have already established strong market positions".

 

The deal, set for completion next month after regulatory approvals, marks a big step forward for CMCC, which has shown increasing determination to tap into overseas emerging markets.

 

CMCC is regarded as the most capable Chinese operator to expand overseas through acquisitions.

 

Its Hong Kong-listed arm had 71.4 billion yuan ($9.1 billion) in hard funds by June 30, 2006.

 

Lu Qijun, a researcher with the State-owned Asset Supervision and Administration Commission, said it was natural for CMCC to expand abroad to generate new revenue streams.

 

"The government has been encouraging telecom operators to expand overseas to grow stronger and bigger," said Lu, adding CMCC is well-positioned to tap into overseas markets thanks to its fat profits.

 

CMCC last year generated 285.3 billion yuan in revenues and 96.8 billion yuan ($12.4 billion) in pre-tax profits. The firm had 318 million mobile phone subscribers by the end of last year, up 20 percent year-on-year.

 

According to statistics released by the Ministry of Information Industry (MII) yesterday, China numbered 461 million mobile phone users by the end of 2006.

 

With mobile phone penetration running high in big cities, CMCC has identified emerging markets including China's rural areas and developing countries as a major battlefield for new subscribers.

 

Pakistan, with its population of over 160 million but with low mobile phone penetration standing at just 12.8 percent in 2005, offers tremendous growth potential.

 

Paktel had 1.56 million mobile phone subscribers by October 2006, an increase of 69 percent from December 2005.

 

Chinese operators' overseas expansion would benefit domestic telecoms equipment manufacturers such as Huawei Technologies and ZTE Corp, gaining a whole new market for their wares.

 

"We believe China Mobile's successful acquisition of Paktel would have a positive effect on our business in Pakistan," said a Huawei spokesman.

 

(China Daily January 23, 2007)