China Mobile Eyes Myanmar

China Mobile buzzes Myanmar

Dominant Chinese mobile carrier China Mobile (HKEx: 941; NYSE: CHL) has a well established track record for its inability to do much outside its home market, but that could change soon with word that it’s teaming with European giant Vodafone (London: VOD) to bid for a mobile license in Myanmar. I’m often quite critical of China Mobile, as I think this cash-rich but lazy company has done little to take advantage of its huge size and resources to innovate and expand both at home and abroad. But in this case we’re finally seeing an initiative that looks well conceived, giving it a good chance of success as China Mobile looks to move into more competitive global markets.Let’s take a closer look at the latest announcement, in which China Mobile says it will partner with Vodafone to bid in an upcoming auction for 2 new licenses to build mobile networks in Myanmar. (company announcement; English article; Chinese article)  The pair would own and operate the new network, which would include coverage throughout the Southeast Asian national formerly known as Burma. China Mobile said Myanmar is expected to award the 2 new licenses in June this year.

Others that have expressed interest in bids include Africa’s largest operator MTN (Johannesburg: MTNJ), top Indian operator Bharti Airtel (Mumbai: BRTI) and dominant Singapore carrier Singtel (Singapore: STEL). A consortium whose members include billionaire investor George Soros and emerging markets specialist Digicel also announced it will bid for one of the 2 licenses. Most of these other bidders are cash-rich operators with rich experience in developing markets, meaning the China Mobile-Vodafone partnership is likely to face some stiff competition.

Despite its own very limited experience outside its home market, China Mobile could still stand a good chance of winning one of the 2 licenses for a number of reasons. From a political perspective, Myanmar has always had relatively good relations with China, with which it shares a long border. Myanmar’s relations with the west have improved considerably over the last 3 years, which is probably one of the main drivers for its latest decision to double the country’s number of mobile networks to 4 from the current 2. So the country could decide that awarding a license to the China Mobile-Vodafone consortium could be a show of goodwill to both China and the west.

The China Mobile-Vodafone consortium also looks good for more practical reasons. China Mobile may not be the most innovative company, but it certainly knows how to build a basic, dependable mobile network based on years of experience in its home market. Its choice of Vodafone as partner brings Europe’s most successful telco into the equation, which should help to provide some state-of-the-art technology and service standards to the pair’s proposed network.

As a longtime China Mobile follower, I’m encouraged that the company is finally making what looks like a smart bid to go abroad under its year-old new top management led by Chairman Xi Guohua. The company made several attempts to buy global assets under previous Chairman Wang Jianzhou, but all of those failed except for one play into the inconsequential Pakistani market. In most of those cases, I suspect China Mobile’s lack of experience and its own lukewarm enthusiasm were big contributors towards the failures. In this instance the company has addressed the inexperience issue by teaming with Vodafone, while the new leadership under Xi also seems a bit more enthusiastic about global expansion.

This new tie-up also represents an unexpected fruit of a much longer partnership between China Mobile and Vodafone, which dates back more than a decade when Vodafone bought 3.2 percent of China Mobile for $3.25 billion. It later sold the stake in 2010, after it failed to get any major strategic benefits from the tie-up. This new Myanmar bid could finally provide at least a minor return to Vodafone for its 10 year investment. At the end of the day, I’d give the China Mobile-Vodafone bid a 70 percent chance of success, in what would be a good start for China Mobile’s future global aspirations.

Bottom line: China Mobile’s bid with Vodafone for a mobile license in Myanmar stands a 70 percent chance of success, with more similar bids likely to follow.

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