China Mobile eyes Hong Kong boost with HKBN buy

The Chinese mobile operator has been holding talks with HKBN's major shareholders MBK Partners and TPG, Bloomberg reported on Monday, citing the usual unnamed sources.

The sources claim that China Mobile has already carried out due diligence on the potential acquisition of HKBN and is now negotiating with the aforementioned shareholders on price. They note that the mobile giant is willing to pay at least HK$5 per share for their holdings, which would value the operator as a whole at more than HK$6.5 billion (US$835 million.)

HKBN's share price has risen by more than 23% in 2024 so far and at the time of writing was sitting at around the HK$4.31 mark; a HK$5 per share acquisition price would represent a reasonable premium.

Given the use of "at least" on the part of Bloomberg's sources, and the fact that they also suggested MBK Partners and TPG may hold out for a higher price, we could be looking at somewhere in the region of a US$1 billion deal here.

Equally, there may be no deal to be had. As is always these case with these types of M&A rumours, it's all heavily caveated. The sources indicated that there is no certainty a deal will result.

And given that we have been hearing about a possible HKBN takeover for the past year or more, it's tempting to dismiss this report.

Indeed, Reuters named China Mobile as a possible suitor for HKBN as long as 18 months ago, but that report came to nothing...thus far. More recently, Singapore's The Business Times indicated that investment firm IDG Capital was also considering an approach to the Hong Kong firm, its major shareholders having revived a strategic review process in March this year, its ultimate aim being to reduce their stakes in the company.

Nothing concrete has emerged thus far, and this latest report could easily have the same outcome.

However, the fact that Bloomberg's sources seem to have plenty of information at their disposal lends credence to the new report. And HKBN would be a great fit for China Mobile, whose Hong Kong mobile operation is the market leader, but whose fixed broadband presence could do with a boost.

It is unclear at this stage whether China Mobile faces any real competition to reach a deal. Bloomberg also namechecked IDG Capital – the firm has expressed interest in a number of Hong Kong-based fixed broadband providers, apparently – as well as pointing out that various private equity firms, including I Squared Capital, have been sniffing around. However, its comment that disagreements over key factors like valuation meant no deal was ever reached perhaps suggests the way is now clear for the Chinese telco.

China Mobile will have to jump through the same hoops to reach an accord with MBK Partners and TPG on what HKBN is worth. And how this story has played out over recent months, we could have to wait some time before we find out how deep its pockets are.