China Mobile Said to Eye USD2bn MTN Assets

China Mobile Ltd. (SEHK: 0941 and NYSE: CHL) is seeking a partner to acquire assets worth about USD 2 billion from its South Africa-based peer MTN Group Ltd., disclosed sources familiar with the Chinese telecom operator's plan on March 30.

This time, China Mobile is looking to buy the minority assets of MTN Group in Iran, Syria and Sudan, as its management team believes the Hong Kong- and New York-listed company is inexperienced at managing such assets, according to one source.

China Mobile is brewing talks for the deal with telecom operators with remarkable market share in Africa and the Middle East, including France Telecom SA (NYSE: FTE), Kuwait-based Mobile Telecommunications Company KSC (Zain), Egypt-based Orascom Telecom Holding S.A.E., and Dubai-headquartered Etisalat.

China Mobile, as one of the big three integrated telecom operators in the country, previously had showed its intention to buy the minority MTN Group assets in Iran, Syria and Sudan but was rejected.

Telecom operators like China Mobile turned to overseas markets for mergers and acquisitions (M&A) as domestic telecom market shows signs of saturated. Currently, China's telecom operators are relying growth on the remote rural market.

China Mobile would take a cautious attitude toward business expansion in markets out of China, said Wang Jianzhou, president for the listed company, at an earlier interview.

Notably, the MTN asset can be blocked by the US Department of the Treasury's Committee on Foreign Investment for political reasons, added the source.

MTN's planned deal with India-based mobile telecom carrier Reliance Communication aborted last year, and some of the market observers ascribed the termination in part to the interference of the US Department of the Treasury's Committee on Foreign Investment.

MTN Group presently holds a 49% stake in MTN Irancell, an 85% stake in MTN Sudan, and a 75% stake in MTN Syria. The multinational has to sell its 20% stake in MTN Irancell before July 2009, according to an agreement MTN Group inked with the Iran government in 2005.

The 20% of MTN Irancell held by MTN Group is valued at USD 1.4 billion roughly, and the MTN Sudan possessed by MTN Group worth about USD 420 million or so, pointed out analysts.

Operating revenue obtained by the three MTN units accounted for only 16% of MTN Group's total in 2008. MTN got 70% of its revenue from businesses in South Africa and Nigeria.

(USD 1 = CNY 6.83)

Source: www.enet.com.cn (March 30, 2009)