Chinese School - China Mobile nears $5.3B Millicom deal

WORLD / Wall Street Journal Exclusive

China Mobile nears $5.3B Millicom deal
By JASON SINGER, JASON DEAN (WSJ)
Updated: 2006-05-25 11:42

China Mobile Communications Corp. is near a $5.3 billion pact to acquire
Millicom International Cellular SA of Luxembourg, operator of
mobile-telephone services in many of the world's poorest nations, in a
move that would expand China's influence into international
telecommunications, especially in emerging markets.

The expected deal -- the biggest overseas acquisition by a Chinese
company -- could also have a ripple effect on Chinese suppliers of
telecom equipment and mobile handsets such as Huawei Technologies Co. and
ZTE Corp. China Mobile is expected to upgrade the network of Millicom,
which operates in 16 countries.

A Chinese woman talks on her mobile phone outside a China Mobile office
in Beijing March 17, 2006. The company is reportedl near a $5.3 billion
pact to acquire Millicom International Cellular SA of Luxembourg.
[Reuters]
Gao Songge, deputy director of the General Department of China Mobile,
said that "the talks are still going on. ... There's no news for
disclosure for now." A spokesman for Millicom declined to comment.

The deal, which could be signed within days, is the latest sign of
Chinese companies' ambitions in snapping up international assets. After
watching Western companies invest billions in their home market, Chinese
companies in recent years have been looking at purchases abroad, most
notably with Lenovo Group Ltd.'s purchase of the personal-computer
division of International Business Machines Corp. For China's government,
the expansion of Chinese companies overseas is part of a broader push to
expand the country's global influence.

But Chinese oil company Cnooc Ltd. last year failed in its high-profile
$18 billion bid to take over Unocal Corp. after opposition to the deal
from Congress. That led to great frustration in China, and Chinese
companies increasingly are looking instead toward the world's
faster-growing emerging markets.

State-owned oil company CNPC International Ltd. last year paid $4 billion
for Petrokazakhstan Inc., which controls oil fields in Kazakhstan. Other
recent Chinese deals have been completed in Nigeria, Ecuador and Peru,
and more are being sought in Russia and Sri Lanka.

China Mobile plans to leverage its access to inexpensive and plentiful
engineers, designers, contractors and others needed to build new Millicom
networks, or to upgrade existing networks in its far-flung locales,
according to people familiar with the matter.

Emerging markets represent a particularly attractive market for telecom
companies as Western markets become saturated. In many developing
nations, the fixed-line infrastructure is poor and limited in its range,
so cellular networks, which are cheaper to roll out than traditional
lines, are used as the primary means of communication.

China Mobile has built one of the most extensive national cellular
networks in the world, covering all of mainland China. With more than 250
million wireless customer accounts as of last month -- all in China --
China Mobile is by far the world's biggest wireless carrier and controls
about two-thirds of the mobile market in China.

China Mobile is owned by China's government. The company owns about 75%
of China Mobile (Hong Kong) Ltd., which is listed in Hong Kong and on the
New York Stock Exchange.

Nasdaq-listed Millicom would be China Mobile's first overseas
acquisition. China Mobile is in the final stages of inking an agreement
to buy Millicom for $48 a share in cash, according to people familiar
with the situation. The deal still hinges on several layers of
administrative approvals in China and will be contingent on the Chinese
company receiving at least 75% of Millicom's shares. Millicom's shares
rose $1.24 to $45.04 in 4 p.m. Nasdaq Stock Market trading.

Millicom is about 40%-owned by Investment AB Kinnevik, a Swedish
family-controlled holding company, and a private Swedish trust.

The deal would give China Mobile, which has so far operated only as a
domestic company, experience owning a multinational concern. Millicom's
executive team is known in the industry as a group with a particular
savvy at selling cellphones and building networks in often-inhospitable
environs in Asia, Africa and Central America.

Millicom reported a 16% rise in subscribers for the first quarter and a
profit of $33.4 million, compared with a loss of $11.3 million a year
earlier. The company, with about 10 million subscribers, said revenue
rose 20% to $322 million, compared with the year-earlier period.

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