State-owned China Mobile Ltd is exploring a buyout of Hong Kong’s leading telecoms company HKBN Ltd, four people with knowledge of the matter said, which could spark a bidding war for the firm currently valued at $1 billion.
China Mobile in recent weeks sent a request for proposal (RFP) to a small group of banks to advise on acquiring and taking-private the Hong Kong telecom provider, which offers services including broadband and Wi-Fi management, said the people.
The Beijing-based company is still receiving pitches from investment banks and has yet to decide on making a formal offer, said the people, declining to be identified as the information is confidential.
HKBN shares jumped more than 17% after the Reuters report and closed at HK$6.57 a piece Tuesday, valuing the company at HK$8.6 billion ($1.1 billion).
HKBN declined to comment. China Mobile did not respond to a request for comment.
China Mobile’s potential takeover interest in HKBN comes after infrastructure investor I Squared Asia Advisors submitted a non-binding letter of interest for the Hong Kong telecoms services provider in March.
HKBN said at that time the infrastructure investor would make an offer via its portfolio company HGC Global Communications and or one of its affiliates, should it proceed with the deal.
There could be other potential suitors for HKBN, said one of the people and a separate person with knowledge of the matter, including Hong Kong-based private equity firm PAG.
PAG declined to comment.
North Asia-focused private equity firm MBK Partners and buyout firm TPG Capital, which are among the top shareholders of HKBN, will seek to fully exit in any potential buyout of the company, separate sources have told Reuters.
MBK and TPG declined to comment.
China Mobile, the world’s largest mobile operator by total number of subscribers, is hoping to bolster its presence in Hong Kong by acquiring HKBN, which provides internet connections to households and corporates, said one of the people.
If China Mobile proceeds with an offer to acquire HKBN, it would mark a major foray by a Chinese telecoms operator into the Asian financial hub and regional home to many global financial institutions.
China Mobile is a large telecoms services provider in the world’s second-largest economy but has a limited footprint outside its home country.
China Mobile launched a Hong Kong business in January 1997, months before the city’s handover to China from the UK. It offers mainly mobile communications and internet services to both households and businesses.
HKBN posted 1% revenue growth to HK$11.6 billion in the financial year to Aug. 31, 2022, while its adjusted net profit surged 20% to HK$905 million.
It had a market share of 37% in Hong Kong’s enterprise broadband business and 34% market share in the city’s residential broadband business, according to its 2022 annual report.
HKBN in 2018 acquired fixed-line operator WTT HK in a deal that valued the business at $1.34 billion. WTT HK’s joint owners, TPG and MBK partially exited in that takeover.
The two companies now each hold 11.05% of HKBN, according to Refinitiv’s Eikon. Canada’s pension fund CPP Investment Board is the company’s top investor with a 13.91% stake, Eikon shows.
Singapore’s sovereign wealth fund GIC is HKBN’s fourth largest shareholder with a 8.02% stake.