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China Mobile Bids to Take First Global Step

China Mobile Communications Corp's bid for a controlling stake in Pakistan Telecommunications Co (PTCL) could, if successful, pave the way for more overseas acquisitions by Chinese telecoms operators, analysts said.


Pakistan's Privatization Commission said over the weekend that eight foreign firms including China Mobile had been shortlisted for a second-round bid for a 26 per cent stake in State-owned PTCL.


The sale of the stake could be worth US$1.9 billion and the buyer will be granted management control.


Chen Jinqiao, a researcher with the China Academy of Telecommunication Research under the Ministry of Information Industry (MII), said China Mobile's bid may mark the beginning of a buying spree by Chinese operators in overseas markets.


"China Mobile, as the world's largest cellular operator (by subscribers), is fully capable of the acquisition of operators in countries which have a stable political environment and sound relationship with China," Chen said in an interview with China Daily.


"China Mobile seems to be passive, (compared to other operators), in overseas expansion. But when it makes up its mind, the overseas acquisitions could be big deals."


Fixed-line carrier China Netcom Group in January bought a 20 per cent stake in Hong Kong's operator PCCW Ltd for US$1 billion.


And China Unicom last week secured a licence to offer a CDMA cellular service in Macao.


"Signs are mounting that a wave of overseas acquisitions by Chinese operators is coming," Chen said.


The researcher said operators may be able to emulate the successful overseas expansion of domestic equipment makers like Huawei Technologies and ZTE Corp.


Huawei and ZTE began their globe-trotting in developing countries and are now targeting developed countries.


"Developing countries should also be the top priority for Chinese operators in their initial overseas expansion," Chen said.


Deputy MII chief Lou Qinjian told a policy briefing on February 28 that an increasing number of operators in developing countries are now hoping to bring in Chinese operators to co-run their businesses.


"They hope Chinese operators and equipment makers can help provide them with a complete set of solutions," Lou said.


The MII and the Ministry of Commerce last December hammered out a set of policies designed to encourage domestic IT and telecoms firms to expand overseas.


The policies cover credit facilities and international settlement.


The China Development Bank has given strong backing to equipment makers in recent years to finance their overseas expansion.


Last December, the bank offered a five-year credit line of US$10 billion to Huawei for overseas expansion.


Huawei spokesman Fu Jun said the firm is willing to partner with domestic operators to jointly tap overseas markets.


However, Huawei will remain focused mainly on equipment sales, he said.


"I think it would be unusual for Huawei to bid for a stake in a foreign operator," Fu said.


Huawei and ZTE were among the firms invited by the Pakistani Government last year to bid for stakes in PTCL.


Huawei and ZTE are the major providers to PTCL's core equipment.


But Chen said domestic operators are still reluctant to expand abroad.


"A flexible performance-assessment programme is needed as overseas expansion can be both very strategic and risky," Chen said.


(China Daily March 15, 2005)


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