May 16, 2002, 11:13 AM — Vodafone Group PLC is to increase its stake in China Mobile (Hong Kong) Ltd, it announced Thursday.
Vodafone subsidiary Vodafone Holdings (Jersey) Ltd. will pay US$750 million for 236.6 million new ordinary shares in China Mobile, increasing its stake in the company from 2.18 percent to 3.27 percent, Vodafone said in a statement.
China Mobile has issued the shares, priced at $24.72, to raise the funds it needs to buy eight provincial mobile telecommunication companies from its parent, China Mobile Communications Corp., Vodafone said.
Vodafone is keen to boost its presence in the huge Chinese market, it said. It signed an agreement with China Mobile in February 2001 to work together on customer relationships, new product development, network optimization and research and development.
Mobile is a "bypass technology," in that it will eventually become more important than the older landline technology, a Vodafone spokesman said Thursday. That will be seen much sooner in China than in Europe, he said. At the moment, mobile phone penetration in China is about 12 percent while fixed-line penetration is about 14 percent. "But if you look at the monthly net additions, the new people signing up, you see that mobile grows by 5 million a month and fixed by 2.9 million. Mobile will bypass fixed soon."
So while the 3.27 percent stake that Vodafone now owns may look small, "it's a very big country -- and one that's obviously under-penetrated," he said.
Vodafone will also receive a cash return on the investment, as China Mobile will now begin to pay dividends, Vodafone said. The first dividend paid will be for the year ending Dec. 31.
The increase in Vodafone's stake entitles it to appoint one nonexecutive director to China Mobile's board. Sir Christopher Gent, chief executive of Vodafone, has been an independent nonexecutive director of China Mobile since February 2001 and is expected to continue in the position, Vodafone said.