Regulatory woes hinder China Mobile acquisition of HKBN

Issues with mainland regulators have left China Mobile’s (0941) acquisition proposal for HKBN (1310) in limbo, according to Sing Tao Daily.

More than two months have passed since the offer to acquire the local broadband service provider, but mainland regulatory authorities have yet to provide any feedback on the approval process, The Standard's sister newspaper reported, citing sources.

Even as a state-owned enterprise, China Mobile is not guaranteed to secure approval, the report said, adding that the telecom giant had previously submitted antitrust documents to the Office of the Communications Authority and made smooth progress locally.

The Chinese telecom firm will need to win nods from regulators that include the National Development and Reform Commission, the Ministry of Commerce, and the State-owned Assets Supervision and Administration Commission of the State Council before the transaction can proceed, according to the offer. Also, once the acquisition goes ahead, it does not necessarily mean a substantial diminishing of competition in Hong Kong.

The recent failure of the plan to privatize China Traditional Chinese Medicine (0570) due to the lack of overseas direct investment approvals from regulators has raised concerns that China Mobile’s purchase of HKBN might also fail to meet all required conditions, adding further unpredictability to the deal, Sing Tao said.

China Mobile in December offered to buy the local broadband service provider for a total of HK$6.86 billion, or HK$5.23 per share. It said shareholders with a nearly 25 percent stake in HKBN had given an “irrevocable undertaking” in favor of its offer.

The other potential buyer – I Squared Capital – was said to have an interest in offering HK$5 to HK$6 per share for HKBN earlier this year, but no formal offer had been submitted to HKBN as of February 3, a filing showed.

Shares of HKBN fell by 4.4 percent to HK$5.01 on Tuesday while those of China Mobile inched down 0.13 percent to HK$77.05.

STAFF REPORTER