China Mobile Communications Corp. hired China International Capital Corp. to advise the world’s biggest phone company on a bid to buy a stake in Shanghai Pudong Development Bank Co., two people involved in the talks said.

The people asked not to be identified because of confidentiality agreements. China Mobile may buy 20 percent of Pudong Bank for about 40 billion yuan ($5.9 billion), or 17.82 yuan a share, Guotai Junan Securities Co. analyst Wu Yonggang wrote in a note last week, without citing anyone.

Jiang Luyang, a Beijing-based spokeswoman at CICC, declined to comment, as did Pudong Bank spokeswoman Gao Xia. China Mobile Chairman Wang Jianzhou told reporters today to wait for an announcement and spokeswoman Rainie Lei declined to confirm or deny the hiring of CICC.

A tie-up with Pudong Bank may help China Mobile, with more customers than the combined populations of the U.S. and Japan, expand its payment service and gain users from a rival system offered by Alibaba Group Holding Ltd. An investment would help replenish capital at Pudong Bank after Chinese lenders extended a record 9.59 trillion yuan of credit last year.

“It will become much more convenient for China Mobile to offer electronic payment services if they have an alliance with a bank,” said Fang Meiqin, research director at BDA China Ltd, a Beijing-based telecommunications industry consultant. “In China, technology companies don’t have the necessary licenses to offer financial services.”

The offer in the Guotai report is 14 percent lower than Pudong Bank’s price before the stock was halted from trading on Feb. 26 pending the announcement of strategic investors.

‘Wait Till Announcemnt’

“For something as big as this, I can’t comment now,” China Mobile’s chairman said in Beijing at a meeting of the advisory body to the nation’s legislature today. “Wait till an announcement is out.”

China Mobile started allowing some users to pay bills with their handsets last year, and began providing other new services such as mobile television and electronic readers, China Mobile’s Wang said in November. The company is expanding its range of value-added services as competition intensifies with rivals China Telecom Corp. and China Unicom (Hong Kong) Ltd.

Alipay, owned by Hangzhou, east China-based Alibaba Group, controls almost 60 percent of China’s online-payment market, according to its Web site. Chinese consumers bought more than 180 billion yuan of goods and services on the Internet last year, according to BDA’s Fang. E-commerce transactions settled using mobile handsets will probably increase to more than 7 billion yuan by 2013, according to BDA.

Not Alone

China Mobile wouldn’t be alone in investing in financial firms. South Korea’s SK Telecom Co. last year agreed to buy a stake in Hana Financial Group Inc.’s credit-card unit for 400 billion won ($349 million), while Globe Telecom Inc. in the Philippines agreed to buy 40 percent of BPI-Globe BanKO Savings Bank in 2008. Nokia Oyj, the world’s biggest maker of mobile phones, last year bought a minority stake in Obopay, a supplier of mobile banking services in the U.S. and India.

Pudong Bank, with 491 outlets nationwide, is seeking to boost financial strength after expanding loans by 30 percent in the first nine months last year to support China’s 4 trillion yuan economic stimulus package. Pudong Bank in September raised 15 billion yuan in a private placement to ensure it has enough capital to meet loan demand and regulatory requirements.

China Mobile Communications, which owns 74 percent of Hong Kong-listed China Mobile, bought a 19.9 percent stake in Phoenix Satellite Television Holdings Ltd. in 2006. A year later, the phone company acquired Paktel Ltd., a wireless carrier in Pakistan, for its first purchase outside Chinese territories.

source:businessweek