BT [BT.L] has announced that it will sell its 20.75% stake in Hong Kong’s third-largest mobile operator SmarTone [0315.HK] to property developer Sun Hung Kai for HKD1.03 billion. The UK group expects the deal to be completed by the end of the month and is proceeding with the sale despite last month’s warning by financial advisor ING that it values SmarTone shares at nearly 5% below its average share price in the final six months of 2002. Sun Hung Kai, owned by the Kwok family, already possess the majority 29.36% share in SmarTone via its Cellular 8 subsidiary and the acquisition of BT’s stake will give it control of the operator.
The change in ownership has prompted SmarTone Chief Executive Douglas Li to reveal plans for the possible acquisition of a rival cellco, saying that SmarTone has money allocated for takeovers. Potential targets include People’s Telephone Co, New World Mobility and Sunday Communications, Hong Kong’s fourth, fifth and sixth-placed cellcos respectively. But analysts have questioned the viability of any potential takeover given the saturation level of the country’s mobile market. Hong Kong had 5.83 million mobile subscribers by the middle of last year, more than 85% of the population, and the two dominant operators, Hutchison and Hong Kong CSL, control around half the market. SmarTone’s subscriber levels have stalled in recent months, with the company claiming a ‘modest decrease’ in customers from the 984,000 posted at the end of June 2002. However, the company did return to profit for the first time in two years and reported a net income of HKD154.6 million in the second half of fiscal 2002. SmarTone is also currently considering a special dividend that could involve a share buyback.