People pass in front of a shop of China Mobile Ltd in Hong Kong earlier this year. The stock price of China Mobile Ltd, the world's biggest phone carrier by market value, fell the most in more than a year Wednesday after Vodafone Group Plc sold its entire 3.2 percent stake in the Chinese telecom giant for $6.5 billion. Jerome Favre / Bloomberg News

Telecom giant's stock price down by 3.78% to HK$78.9 per share

China Mobile Ltd had its biggest daily decline in more than a year Wednesday, falling 3.78 percent to close at HK$78.9 per share. The world's biggest phone carrier by market value slumped on news that Vodafone Group Plc disposed its entire 3.2 percent stake in the company for $6.5 billion.

It was the biggest daily decline for the company since August 17, 2009. Turnover of the stock surged to HK$58.84 billion.

China Mobile's share price is likely to face further downward pressure as the Hong Kong market is trading in a narrow range and global market sentiment is still weak, Sincere Securities Chief Executive Officer Louie Shum told China Daily.

However, Shum was bullish about the long-term share price performance of the company as it will expand its new businesses in value-added services such as 3G services and text messaging.

"The development of the rural market is the other growth engine for the company as the operator is striving to develop this market segment," Shum said.

Newbury, England-based Vodafone sold nearly 643 million China Mobile shares, which is the equivalent of 3.2 percent stake of the mainland telecom operator, at HK$79.2 each. The price represented a 3.4 percent discount to the stock's last closing price of HK$82 on Tuesday. After the transaction, Vodafone can pocket the proceeds of $6.5 billion.

About 70 percent of the proceeds will be returned to shareholders through a stock repurchase and the rest will be used to pay down debt, Vodafone said. Morgan Stanley, UBS AG and Goldman Sachs Group Inc are managing the offer. The sale of China Mobile shares represented the biggest divestment by Vodafone since Chief Executive Officer Vittorio Colao took office in 2008.

Colao stressed that the commercial and technology cooperation between the two companies will continue even after the stake sale.

However, financial analysts argued that the future business cooperation potential between Vodafone and China Mobile was actually looking pretty bleak.

Samsung Securities Co analyst Paul Wuh argued that as there is little business synergy between the two telecom operators, Vodafone decided to dispose all of its stake in China Mobile to bring more returns to Vodafone investors.

As Vodafone acquired its holding in China Mobile in two transactions between 2000 and 2002 for $3.25 billion, its proceeds of $6.5 billion meant that Vodafone doubled its investment in China Mobile.

Flora Wu, a telecommunications analyst at BDA China Ltd in Beijing, said that the sale will have little impact on China Mobile as there was not much cooperation between the two firms.

China Daily

(HK Edition 09/09/2010 page2)