China Mobile is in talks to acquire Hong Kong fiber and enterprise provider HKBN.
The state-owned giant has offered at least HK$5 per share to HKBN’s main shareholders, valuing the company at more than 6.5 billion Hong Kong dollars (US$835 million), Bloomberg reported Tuesday, quoting people close to the talks.
HKBN traded at HK$4.31 before calling a trading halt at 9am Tuesday pending the release of an announcement, as required by Hong Kong exchange rules. The stock has climbed 17% over the past five trading days.
HKBN has drawn interest from potential investors such as IDG Capital, I Squared Capital and KKR over the past 18 months, but these deals have never completed, due primarily to disagreements over valuation, Bloomberg reports.
Other potential buyers, including PE firms, remain interested in the company, sources said.
HKBN's biggest shareholders are Korean-based MBK Partners and firm TPG Asia Advisors, each owning 17.4%, with the Canadian Pension Plan Investment Board holding 13.9% and Singapore government's GIC Pte Ltd 7.0%.
Obvious option
We can only speculate as to why China Mobile, the biggest mobile operator in Hong Kong by subs numbers, is eyeing HKBN. No doubt it is partly due to a desire by Beijing authorities to further cement state control over sensitive Hong Kong infrastructure.
From an industry perspective at least, however, HKBN is the obvious option for a telco wanting to expand its mobile-only footprint.
It is one of the city's two big broadband providers, with its all-fiber network passing 2.6 million homes and clocking 932,000 residential broadband subs. It has also built out an enterprise business, which is now its largest segment.
But its stock price has taken a pummeling in recent years, down 68% since 2019 thanks to broadband saturation and its difficulties in gaining enterprise market share.
In its latest full-year result it reported an adjusted net profit of HK$190 million, down 2% from last year. Revenue shrank by 9% with sales flat or declining in every segment. The company shed 570 staff, or 13% of the total.
If the sale proceeds, it wouldn’t be the first acquisition this year of a Hong Kong fixed-line asset by a mainland buyer. Market leader HKT agreed in June to sell 40% of its fixed network business to a JV between China Merchants Bank and Singapore investment firm GLP Holdings.
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