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China Mobile to list in Shanghai as NYSE eviction takes effect

Telecom leader could raise up to $7bn on mainland exchange, joining two rivals

China Mobile says that its planned Shanghai listing will "grasp the window of opportunity" to develop the company's information services market.   © Reuters

HONG KONG -- China Mobile, the largest telecommunications carrier in the world by subscribers, said it will list its shares in Shanghai following the company's forced delisting from the New York Stock Exchange.

The company, whose shares also are listed in Hong Kong, announced late on Monday that its board had approved a plan to issue new yuan-denominated shares that will trade on the main board of the Shanghai Stock Exchange. The company is planning to issue up to 964.81 million shares, or 4.5% of the expanded shareholder base.

The share price has not yet been determined, nor does the stock have a listing date, but by applying Monday's closing price in Hong Kong of HK$48.80, the value of the listing would be roughly 47.08 billion Hong Kong dollars ($6.1 billion). If the overallotment option is fully exercised, with up to 144.7 million additional shares issued, the company could raise up to $7 billion.

Given that the pricing mechanism in mainland China is structurally different from Hong Kong, the eventual issue size could vary, but China Mobile's listing could be the largest in years in the mainland and compete with a listing being prepared by rival China Telecom.

While the timing of China Mobile's listing is not yet clear, a banker familiar with the process told Nikkei Asia that it would take about three to six months, following China Telecom's listing.

China Mobile’s plan to list in Shanghai comes as its American depository receipts are delisted from the New York Stock Exchange, along with those of China Telecom and China Unicom.   © Reuters

The joint sponsors and lead underwriters of China Mobile's listing are China International Capital Corp. and Citic Securities, both state-owned financial institutions. China Mobile will need approval for the new listing from its shareholders at a future extraordinary general meeting, as well as approvals from the mainland regulator and the Shanghai exchange.

The company's announcement of plans to list in Shanghai coincides with the delisting of its American depository receipts from the NYSE on Tuesday, along with those of two other state-owned peers, China Telecom and China Unicom. Holders of the delisted ADRs can exchange them for Hong Kong-listed shares and eventually sell them.

The ejection of these companies from the U.S. exchange comes from an order issued under former President Donald Trump that bars Americans from investing in mainland Chinese companies deemed to have ties to the military, a link that Beijing has denied.

While all three telecom companies are listed in Hong Kong, China Telecom kicked off the process of selling shares in Shanghai in March. China Unicom already has a separate unit listed in Shanghai.

China Mobile, however, is a so-called red chip company, a state-owned enterprise that is incorporated outside the mainland with a primary listing in Hong Kong. Unlike its two rivals, China Mobile must adhere to a different set of rules before making its way to the Shanghai exchange. Beijing recently implemented new policies to pave the way for red chips to list on mainland exchanges.

Yang Jie, chairman of China Mobile, told reporters in an online earnings call in March that he had "taken note" of those new moves by the government. He said that the company is "now proactively following and promptly studying" those policies, adding that he would be willing to move forward if he was "convinced" that a mainland listing would help the company's growth and provide greater opportunities for domestic investors to partake in that process.

Domestic investors in China have limited ability to invest outside of mainland markets, except for a few regulator-sanctioned arrangements, including special investment quotas or formal trading channels with the Hong Kong Stock Exchange.

China Mobile said in its Monday statement that the Shanghai listing will "grasp the window of opportunity" to develop its information services market. The company said that proceeds from the listing will be used to build premium 5G networks, new infrastructure for cloud resources, gigabit broadband, and for research and development of next-generation information technology and a digitized ecosystem, among other projects.

China Mobile, like other listed telecom carriers around the world, is under pressure from investors to keep a check on capital spending, especially on 5G, as the return on investment for these companies is not certain. Despite being in the middle of a three-year peak investment period, Yang said that the company's capital-expenditure budget in 2021 is set at 183.6 billion yuan ($28.5 billion), a mere 1.7% increase from last year.

"The company will stringently manage its investment size," Yang said in an earnings call in March, suggesting there will not be a spike in 5G and other investment spending in 2022, the final year of its peak investment period.

Its unlisted parent, China Mobile Communications Group, where Yang doubles as chairman, has agreed to a "co-build, co-share" arrangement, with China Broadcasting Network Corp., the parent of another 5G operator in China, to jointly construct, supervise and use each other's 5G infrastructure in order to save on investment costs.

While China Mobile expounded on its listing proposal and subsequent investment plans in an 18-page disclosure to the Hong Kong exchange on Monday, there was no mention of its forced delisting from the NYSE.

Additional reporting by Narayanan Somasundaram.

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