International business: China mobile History of China mobile China mobile is recognized worldwide as one of the largest mobile telephone service providers with its base in Hong Kong. The telecommunication company provides both the mobile voice and multimedia services and has been operational since its inception in 1997. However, China mobile was started after a break-up from the parent company which was known as China telecom. The company is government controlled and it serves a vast majority of the Chinese market, taking up a whooping 70% of the market share. Why did china mobile feel it was necessary to issue equity in markets outside of its home base in Hong Kong? One the reasons that made the company to show equity in the outside markets was that the company was concerned about the new competition it was facing in Hong Kong from the other service providers such as china Unicom and china telecom. China mobile had to be unique and different from its main competitors in the market in order to attract more customers into the company. Another factor that made the company to issue equity to the outside market is that it was already assured of the government support and therefore it had a bigger share of the market at home. In addition the company’s main concern was to expand its customer base by establishing itself in other markets and therefore it was worried of the new competition it would face if china joined the World Trade Organization. The mobile service provider company therefore felt that the only way it would make a mark on the global market was by being offering the same services in order to woo more customers. What are the advantages if such a move? One of the ways china mobile would benefit from such a move was that, it would attract more customer thereby penetrating the global market more easily. This would in turn increase the company’s revenue enabling it to implement some of its expansion plans. The idea of issuing equity in the outside market would further decongest the home market whereby the services offered in Hong Kong could be available elsewhere. The equity in markets would further offer china mobile the opportunity to spread its services to other countries thus enabling the company to grow. The other advantage is that company would earn a global recognition hence winning the confidence of customers’ world wide. This would mean that the company’s products and services would be affordable to all consumers’ worldwide thus giving china mobile a mark over the other mobile service providers. Another factor that china mobile would benefit from the move is that it would increase the supply of funds available and also lower its cost of capital. Why did China Mobile price the bond issue in U.S. dollars instead of Hong Kong dollars? The main reason as to why china mobile priced its bonds in U.S dollars was because the company was listed in the New York stock exchange in order to lower the cost of capital the company required to establish itself on the global market. This meant that the interest rate that china mobile would incur would be lower than it had earlier planned. In addition the mobile service company was getting into the global market and therefore it had to change its currency in order to fit into the market. The change of currency from the Hong Kong dollar to the U.S dollar served china mobile a great deal since the company overcame some of the financial constraints that it was going through in the Hong Kong market. This factor benefited the company in that the number of investors and borrowers increased due to the reduced cost of capital. Can you see any downside to China Mobile’s international equity and bond issue? China mobile stands to be affected negatively by the international equity issue simply because of the movement of stock prices. Economists argue that the movement of stocks between different countries has a negative impact on the international portfolio since countries pursue different macroeconomic policies and therefore facing different economic conditions. This would see some countries suffer with their economies due to the differences in agenda’s. Another thing that would china mobile is the lose of investors in Hong Kong due to the perception they have about the international capital market. Most investors prefer making long term investments in their home countries and investing very little outside their country. This is primarily based on the security situations of the foreign countries in addition to their economic powers. China mobile also risks’ experiencing a reduction in terms of the profits and returns and this is due to the stiff competition that it will encounter on the global market. At the global level the competition is tough especially to new businesses which come on board and therefore the company would take time before they adapt to the market. Reference Platt, œChina Telecom Issue Poorly Received in U.S ,Global Finance, January 2003. Waller, œDaimler in $250m Singapore Placing, œFinancial Times, May 10, 1994. Cisco. œChina mobile application store. China mobile (2010): pgs.1-4. Funding universe. China telecom. 2001. 30 9 2011

. The gurdian. State owned China Mobile is world’s biggest mobile phone operator. 11 January 2010. 30 9 2011

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