China Mobile to buy into bank

Hong Kong: China Mobile agreed to buy 20 per cent of Shanghai Pudong Development Bank Co. for 39.8 billion yuan (Dh21 billion) to expand its electronic-payment business.

The carrier's Guangdong Mobile unit plans to buy 2.21 billion new China-listed shares for 18.03 yuan apiece, according to a statement to the Hong Kong stock exchange yesterday. That's 13 per cent lower than the bank's last-traded price.

China Mobile and Pud-ong Bank will form a strategic alliance to offer wireless finance services including mobile bank cards and payment services, the statement said.

Underperformed

The phone company's shares have underperformed the benchmark Hang Seng Index since February 26, when trading in the lender was halted, on concern the operator is deviating from its main business.

"This is not something we'd prefer," said Pauline Dan, chief investment officer at Samsung Investment Trust, which oversees $80 billion (Dh293 billion) in assets, including China Mobile shares.

"From a return perspective, it's much better for the company to return the cash to shareholders."

The carrier rose 0.1 per cent HK$74.15 (Dh35.09) in Hong Kong trading yesterday before the announcement. The stock has lost 3.2 per cent since February 26 when Shanghai Pudong Bank shares were suspended at 20.74 yuan pending the announcement.

For Pudong Bank, the deal will help it replenish capital after Chinese banks extended a record 9.59 trillion yuan of credit last year.

China Mobile is valued at $193 billion as of yesterday, compared with $151 billion for AT&T Inc. China Telecom, the next-biggest Chinese carrier is valued at $36.6 billion. Shanghai Pudong Bank is worth $26.8 billion.

The purchase will make China Mobile the second-biggest shareholder in the bank after Shanghai International Group, according to the statement.

The investment presents China Mobile a platform to offer wireless-banking services to more than 527 million customers in the world's fastest-growing major economy.

The Hong Kong-listed company had 256 billion yuan of cash at the end of June, according to its interim report in August.

Shares in the carrier fell to a two-month low on March 4, a day after the company confirmed it had begun talks to buy the Shanghai Pudong stake.