China Mobile Surges After $36 Billion Carrier Revamp Unveiled

  • Deal is part of government reform of state-owned enterprises
  • Three biggest carriers' shares rally after revamp unveiled

China Mobile Ltd. rose the most in more than three weeks after the nation’s wireless carriers reorganized the industry by merging $36 billion of network assets.

The world’s biggest carrier by subscribers jumped 2.7 percent to HK$93.70 in Hong Kong, the biggest gain since Sept. 22. Smaller rivals China Telecom Corp. fell 0.5 percent and China Unicom (Hong Kong) Ltd. slipped 2.8 percent. The three operators will share control of a new company holding assets, including thousands of base stations.

The restructuring is part of a broader road map for reviving underperforming state enterprises. President Xi Jinping’s administration has pushed to overhaul a bloated $16 trillion government sector as the world’s second-largest economy heads for its slowest growth in a quarter-century. The carriers have come under pressure as customers increasingly switch to mobile messaging tools such as Tencent Holdings Ltd.’s WeChat service.

“The completion of the long-awaited tower asset injection should help to level the competitive ground” for the smaller operators,” Cynthia Meng, an analyst at Jefferies Group LLC, wrote in a note Thursday. “However, due to the magnitude of the scale, we believe China Mobile will remain the dominant telecom market leader by far.”

China Mobile will own 38 percent of China Tower Co. while China Telecom and China Unicom will each have about 28 percent.

Logical Step

The nation’s carriers announced plans last year to create China Tower by pooling assets and reducing duplication as the country rolls out faster networks.

Competition among the three wireless operators in China , the world’s largest telecommunications market, has increasingly focused on wireless data services and 4G licensing. China Telecom and China Unicom both started offering fourth-generation network services in February, ending a monopoly held by China Mobile since the beginning of last year.

Beijing-based China Reform Holdings Corp. will own about 6 percent of China Tower, it said in a statement announcing the deal on its website. The statement didn’t specify the amount of the deal, yet the state-run Xinhua News Agency said the assets were valued at 231.4 billion yuan.

China Reform’s investment would help China Tower pay for building a network of electric-car charging stations, people familiar with the matter said this month. The government wants to boost availability of the facilities to spur adoption of the vehicles, and it assigned state-owned China Tower to build out the network because it will have a nationwide footprint with its telecommunications assets, the people said.

“This seems to be a fairly logical, sensible reform step,” Tony Hann, head of equities at Blackfriars Asset Management Ltd. in London, said by phone Wednesday. “Having a tower company will force them to share their assets.”

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