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China Telecom's Plan to Acquire Networks Sparks Strong Buying
Shares of China Telecom (Hong Kong) Ltd, which is to changed to China Mobile (Hong Kong) Ltd, attracted strong buying interest Tuesday after saying it was negotiating to acquire seven mobile phone networks in China from its parent for up to US$30 billion.
The buying comes after China Telecom announced Monday that it is likely to
buy from parent China Mobile Communications seven mobile phone networks located in Beijing, Tianjin, Shanghai, Liaoning, Hebei, Shandong and Guangxi.
China Telecom shares rose 1.50 Hong Kong dollars (19 US cents) to close morning trade at 68.00 dollars.
"China Telecom shares have attracted strong buying because of the announcement of the acquisition plans," said Alex Tang, research director at Core Pacific-Yamaichi.
Analysts said the acquisitions would give China Telecom the majority of China's mobile communications market.
"If the acquisition plan is carried out, China Telecom is expected to take a 55-60 percent share of China's mobile phone market," Grace Chan, an analyst with Tai Fook Securities told AFP financial news subsidiary AFX-Asia.
As of the end of May, the number of China Telecom's subscribers reached 20 million, up 4.8 million from the end of 1999, according to the company.
Currently, the company operates six mobile phone networks in Guangdong, Zhejiang, Jiangsu, Fujian, Henan and Hainan provinces.
Peggy Ho, assistant sales director with Capital Securities (HK) Ltd, said the current momentum is expected to boost the China Telecom share price to more than 70 dollars shortly.
Arthur Law, a telecom analyst with Core Pacific Yamaichi Securities, said he expects the acquisition will boost China Telecom's net profit by roughly 80 percent a year.
Morgan Stanley analyst Mark Shuper said in a research note the seven target networks had about 10.2 million subscribers at the end of 1999, compared with the company's current subscriber base of 15.6 million.
Assuming a 20 pct discount, the new networks would cost the company 20-21 billion US dollars and "experience suggests the majority (of the acquisition cost) will be funded through new equity."
Nomura Securites' Richard Ferguson said he expects the acquisition would cost China Telecom up to 30 billion dollars.
"Since the Ministry of Information Industry (which owns China Telecom's parent) will have to maintain a 75 pct stake in China Telecom, the company will issue new shares of about 7.1 bln usd to raise funds from the equity market," Ferguson said.
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