Vodafone Sees Improved Opportunities in China
Vodafone expects to increase its presence in China following a long anticipate restructuring of the telecoms market by the government. Vodafone’s chief executive, Arun Sarin told the London Financial Times that the group’s stake in China Mobile »”>China Mobile - valued at around US$13 billion - is a “kitty” that could be used to take advantage of potential opportunities.
The Chinese government has been oft rumoured to be planning a reshuffle of its telecoms operators prior to the awarding of 3G licenses next year. The most widely reported rumour is that the smaller mobile operator, China Unicom would be split into with its GSM and CDMA operations transferred to the incumbent landline operators, China Telecom and China Netcom.
If China Mobile is also broken up - as some analysts expect, then it could be an opportunity for Vodafone to swap its small 3% holding in China Mobile for a larger percentage stake in whatever future companies are created. Considering the size of the Chinese market, and the scope for growth still remaining, the move would undoubtedly be beneficial for Vodafone.
Sarin stressed Vodafone did not expect to obtain a majority stake in a Chinese wireless business, because of government control.
The only down-side is that the company has often come under pressure to sell its 45% minority stake in Verizon Wireless due to its lack of management control - and if the company found itself in a similar position in China, then there could be activist shareholder pressure to sell the stake quickly and return the cash to the shareholders as opposed to treating it as a long term investment.
Vodafone originally paid US$2.5 billion for a 2.18% stake in China Mobile back in October 2000, and paid US$750 in June 2002 to increase the stake to 3.27% and gain the right to appoint a director to the board of China Mobile. The stake is now valued by Vodafone at US$13 billion.
Tags: 3G, China-Mobile, China-Netcom, China-Telecom, China-Unicom, GSM