• The current global trade kerfuffle has not diminished the strategic value of Hong Kong Broadband Networks (HKBN)
• If anything, it’s sharpened the resolve of the bidder, China Mobile, which has secured a 15% stake in the company in support of the formal offer it had already submitted
• A bidding war looms as the HKBN board sits tight

Tariffs are rising and falling faster than the Roman Empire on fast-forward, share prices are tumbling and a worldwide recession looms, but far from freezing in the crosshairs of an intensifying trade war, the fight over Hong Kong Broadband Network (HKBN) shifted up a notch recently when China Mobile announced an agreement to acquire a 15.46% stake in the company from an existing shareholder, TPG Wireman, for about US$154m.

China Mobile made a formal offer in early December 2024 to acquire HKBN, valuing it at approximately HK$6.86bn (US$881m) or HK$5.23 per share. That offer could rise to as much as HK$7.8bn (just over US$1bn) when factoring in restricted share units and vendor loan notes.

But also in the running is I Squared Capital, the US-based investment firm that already owns Hong Kong’s HGC Global Communications. It is preparing a rival bid that could reach up to US$1bn. If successful, it aims to merge HKBN with HGC Global Communications, further consolidating the local telecom market. The firm’s renewed interest follows earlier, unsuccessful buyout talks in 2023 – see Infrastructure investor sparks bidding war for HKBN.

To strengthen its hand, China Mobile, through its subsidiary China Mobile Hong Kong (CMHK), has struck a deal to acquire TPG Wireman’s entire existing stake of about 145 million HKBN shares for HK$758.2m ($97.7m) as well as its vendor loan conversion shares for HK$437.5m (US$56.4m). 

The deal will make China Mobile HK (CMHK) the equal largest shareholder in HKBN, with investment company Twin Holding also owning a 15.46% stake.

The move significantly strengthens China Mobile’s hand in its battle with I Squared Capital, which has yet to submit a formal offer and has reportedly run into some challenges in putting together its offer. The HKBN board noted that it is still evaluating its options and that discussions and negotiations with all the parties “remain ongoing” and that it has “not formed any definitive views nor reached any formal or legally binding agreement with either party”.

But China Mobile, with its scale and influence, looks to be in the driving seat. In addition to being the largest telco in mainland China, with more than 1 billion mobile customers and 480 million fixed broadband users, its CMHK subsidiary is Hong Kong’s largest mobile operator with more than 8 million customers in what is a highly competitive and fractured market (with five service providers competing for about 28 million users).  

If China Mobile prevails in the takeover battle, it will be able to combine that mobile market strength with HKBN’s position in the fixed line sector, where it has a fibre access network passing almost 2.6 million residential households (of Hong Kong’s 2.67 million total) and more than 8 million commercial premises. With more than 900,000 customers, it has a 30% share of the Hong Kong residential broadband services market, plus about 110,000 enterprise broadband users, but its customer numbers in both the consumer and business-to-business broadband markets have been dropping in a very competitive market that includes the likes of PCCW (HKT), SmarTone, HGC Global Communications and dozens of specialist ISPs.

If I Squared Capital makes a successful bid, it will be able to combine HKBN with HGC Global Communications, which has 1 million customers, of which about 400,000 are consumer broadband users. 

– Ian Scales, Contributing Editor, TelecomTV