China Mobile Group got robbed

According to Chinese news, China Mobile’s ultimate parent, the China State Asset Management Co. (CSAM), took 50 billion Chinese Yuan (about 7.30 billion USD) from China Mobile Group (the parent of China Mobile Limited, NYSE: CHL; HKSE:0941), and gave it to China Telecom. For CSAM, this is merely put money from left pocket to right pocket, because both China Mobile and China Telecom are majority owned by CSAM. But for CHL shareholder like me, this is merely another highway robbery, orchestrated in the name of “balance of power in China telecom industry”.

China Mobile Limited CHL

China Mobile Group is the holding company of China Mobile Limited (listed company). I think one reason goverment did this, is they actually don’t have much money at hand. Another reason, to put some constraints on the development of China Mobile, which has dominant position in China mobile communication industry. But this does not come without any moral hazard, the Chinese goverment did not rob directly from the shareholders of CHL, but they did it in an indirect way. China Mobile has about 4 billion shares (ADR equivalent), $7 billion divide by 4 billion, which is about $1.82 per share for CHL shareholders. In other words, China Mobile worked 6 months for the goverment for free.

On the postive side, China Mobile management and employee will see the urgency of developing the 3G, and other business.

Ref: Yang Hai Feng Chinese article, the transfer of 50 billion may not be a bad thing for China Mobile.

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