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Close vote led China Mobile to end Millicom buy

Written by: Staff
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Hong Kong, Jul 4: China Mobile decided at the eleventh hour to nix a .3 billion purchase of Millicom International, two sources close to the deal said on Tuesday, as the world's top cellular firm got cold feet before closing its latest takeover attempt.

China Mobile executives declined comment. But an industry source familiar with the process had said that four of seven top officials from the parent had voted down the takeover during a meeting.

Another source confirmed that separately.

Emerging markets specialist Millicom on Monday blamed the surprise collapse of the long-awaited deal, which would have marked the largest overseas acquisition by a Chinese firm, on an unattractive offer.

China Mobile's latest failure, which follows a string of abortive approaches to firms from India to Uzbekistan, might discourage other targets or even dissuade Chinese firms from similar deals.

''Chinese SOEs (state-owned enterprises) cannot make a decision by themselves. They have to go to several government departments to obtain approval,'' said Allan Ng, a telecoms analyst with BOC International.

''It's going to be a more drawn-out process. You have to be more patient dealing with a Chinese company.'' Millicom said on Monday that it had been in prolonged talks with, and opened its books to, a potential buyer, which sources have said was the parent company of Hong Kong-listed China Mobile Ltd.

The Chinese corporate standard-bearer had come under pressure from Beijing for years to answer a national appeal to make overseas investments, while finding a way to use its growing cash hoard.

Yet the expensive price tag, some analysts estimated China Mobile would have been paying a nearly 80 percent premium, and operating uncertainty proved insurmountable.

''Sellers are likely to be wary about Chinese bidders' lengthy bureaucratic process and their ability to follow through on talks to complete a deal,'' Credit Suisse said in a research note.

CALLING A HALT

Millicom said on Monday it had decided to halt discussions about the sale of the company, sending its shares plummeting 28 percent to 239 crowns. The stock had soared since news of the offers broke, peaking at 370 crowns on March 28.

Before Monday's plunge, Millicom's stock had soared more than 50 percent since the start of the year, propelled by speculation of the impending sale.

Controlled by Swedish telecoms and media group Kinnevik, Millicom has more than 9 million subscribers in 16 countries across Latin America, Africa and Asia.

China Mobile's interest was triggered in part because of Beijing's nascent ''go abroad'' campaign spanning sectors from telecoms to energy.

That drive has spurred a number of acquisitions, including Lenovo Group Ltd.'s purchase of IBM's personal computer assets, though CNOOC Ltd. was rebuffed in its bid to buy U.S. oil company Unocal Corp.

China Mobile has been unsuccessful in all its attempted major takeovers so far. Last year, it lost out in the bidding for Pakistan Telecommunication Co. Ltd. and failed to land Indian mobile operator Reliance Telecom Ltd., according to local media.

Executives had also visited Uzbekistan to discuss buying state-owned Uzbekistan Telecom, state media have said.

''Millicom fit their expansion roadmap,'' said a source close to the firm. ''But the company was too cautious.'' At the end of 2005, listed China Mobile had net cash generated from operating activities of 131.7 billion yuan (.4 billion), up 27 percent from 2004.

But analysts had estimated that China Mobile would pay - a share, up to a 79 percent premium to the company's share price at the start of the year.

''It was the price that did in the deal,'' said the second source. ''The firm has to 'go out'. But the timing is important.''

REUTERS

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