China Mobile Makes Its First Overseas Buy

The world's biggest mobile phone operator is acquiring 89% of Pakistan's Paktel, the beginning of an emerging market foray

China Mobile (CHL), already the world's largest mobile phone company, with more than 300 million subscribers across the mainland, is making its first overseas acquisition by buying a majority stake in Paktel. The Pakistani company is owned by Luxembourg-based Millicom International Cellular (MICCF).

China Mobile will purchase 89% of Paktel for $284 million, gaining a beachhead in the still small, but fast-growing, Pakistani mobile market. Pakistan now has 46 million mobile users compared with 444 million today in China. The move is seen as an opportunity to use the expertise China Mobile has developed in serving the world's largest mobile market in this new emerging market.

"For China Mobile, the key is focusing on emerging markets," says Zhang Dongming, research director at Beijing-based telecom consultancy BDA China. "That allows them to achieve synergies and leverage their experience in China."

Not Looking at Mature Markets

China Mobile made its first foray outside the mainland a year ago when the company bought Hong Kong's No. 4 mobile company People's Telephone with its 1.1 million subscribers. China Mobile unsuccessfully bid for Paktel's parent company Millicom in a $5.3 billion deal, which finally fell through in July of last year.

That deal, which would have acquired the worldwide operations of Millicom—including those in Africa and Latin America, as well as Asia—disintegrated over last minute concerns about the acquisition price, analysts say.

The Hong Kong-listed China Mobile boasts a market capitalization of $180 billion and is the world's most valuable telecom company. It has repeatedly made clear its intention to focus on developing markets in its much-anticipated push overseas. "We are particularly interested in emerging markets," said China Mobile Chairman Wang Jianzhou in an exclusive interview with BusinessWeek late last year. "We are not interested in mature markets like North America or Western Europe." (See, 11/1/06, "BW CEO Forum: China Mobile at Full Speed.")

Running the Gamut

The company certainly isn't turning its back on the mainland market, however, where it is adding close to 5 million new subscribers each month. As well as focusing on signing new subscribers in China's rural market of 700 million people, it's also aggressively pushing into value-added services including short text messaging, ring tones, and music downloads, as well as mobile Internet.

So in June of last year, it spent $166 million to purchase a 19.9% stake of Phoenix Satellite Television Holdings, China's most popular cable news and entertainment channel. It has also signed music download agreements with Sony BMG (SNE), Universal Music Group, and Warner Music (WMG). And on Jan. 4 it announced it will work with Google (GOOG) to offer mobile search on its Monternet WAP portal later this year.

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