Brazil and Africa are the basis for Chinese interest in Portugal Telecom

18 February 2013

China Mobile is interested in expanding into the Portuguese and Brazilian market and Portugal Telecom is expected to be its preferred investment target, because of its operations in Africa and Brazil, according to market analysts.

The board of China Mobile, which is considering investing in Germany, South Africa, Brazil, Portugal and North Korea, has started the process of analysing the macroeconomic and economic climate of five countries, according to Chinese English-language newspaper the Morning Whistle.

If it goes ahead this will be the latest in a series of Chinese investments in Portugal following transactions that made large Chinese companies major players in the Portuguese energy sector (China State Grid Corp and China Three Gorges) and the financial sector (Bank of China).

Portugal Telecom has a 25 percent stake in one of the most important Brazilian mobile telecommunications companies, Oi.

In Angola, it owns 25 percent of mobile telecommunications operator Unitel, 40 percent of Multitel (Internet access and data provider) and also controls ELTA, Angola’s telephone directory company.

In Mozambique it owns directory company, Listas Telefónicas de Moçambique and Teledata (ISP and data), in Cape Verde it has a stake in CV Telecom (40 percent) and Directel (60 percent) and in São Tomé and Príncipe it has a majority stake in Companhia Santomense de Telecomunicações (51 percent).

It is also present in Namibia, Kenya and in Timor.

In an analysis issued last week, analysts from Portuguese bank BPI said that, if the investment went ahead, “Portugal Telecom would be the most likely candidate given its international presence both in Brazil and in Africa.”

As well as Portugal Telecom, another potentially interesting operator would be Zon, which is currently being merged with Sonaecom, and which has a significant stake in Cable TV in Angola and whose shareholders include Angolan billionaire Isabel dos Santos.

China Mobile is the world’s largest mobile phone operator by number of customers and, according to analysts from Trefis, Portugal Telecom, which ahs a market capitalisation of US$5 billion, is within the company’s grasp.

“Portugal is going through a big recession and with record unemployment it may not make financial sense to enter the market at this stage. However, comparatively low valuations may encourage China Mobile to put its foot in the door of a developed market,” the analysts said.

Trefis also noted that the mobile communications market in Portugal is similar to China’s, as it has three large operators: TMN (PT group), with 7.3 million customers, Vodafone Portugal, with 6.6 million, and Optimus, with 2.5 million.

In March 2012 the chairman of China Mobile, Wang Jianzhou, said that the board planned to expand the company’s business to other markets but that this had not been possible due to the high price of acquiring companies that were already set up in those markets.

Privatisation operations in Portugal, which have become necessary because of the country’s economic and financial crisis, have led to Chinese companies entering the market.

China Three Gorges paid around US$2.7 billion for 21.35 percent of EDP, thus becoming the Portuguese power company’s largest shareholder. Another large Chinese state company, China State Grid Corp, acquired 25 percent of Portuguese power grid company Redes Energéticas Nacionais (REN) for 287.15 million euros.

The Bank of China, which provided EDP with a loan of 800 million euros, plans to open in Portugal in March.

The Development Bank of China recently provided a loan to EDP worth 1 billion euros and will provide a further billion euros at the beginning of 2014, as agreed when the company was privatised. (macauhub)