China Mobile Cements 23-Year Relationship With Asiainfo Investment

Leading wireless carrier China Mobile will pay HK$1.4 billion ($181 million) for 20% of telecom software supplier Asiainfo Technologies Ltd., cementing one of the oldest relationships between China’s state-owned and private high-tech sectors.

China Mobile will buy the stake at a substantial discount of about 28% to Asiainfo’s stock price before announcement of the deal, according to a stock exchange filing by Asiainfo late on Tuesday. The carrier, the world’s largest with nearly 1 billion subscribers, will pay HK$7.60 for 182 million new Asiainfo shares, or 20% of the company’s enlarged share capital, the announcement said.

The deal would make China Mobile Asiainfo’s second largest shareholder, behind only Skipper Investment Ltd., an entity controlled by financial giant Citic Group, whose share in Asiainfo would drop to 23.5% after the deal from a previous 29.3%.

The tie-up will allow the two sides to “jointly explore development opportunities in face with new strategic areas,” Asiainfo said.

“By fostering the integration and innovation as well as rapid development of the information and communication industries in the PRC, both parties will create new deployment for industry development while bringing new momentum to society transformation and innovative development,” Asiainfo said. “The directors also consider that the subscription could consolidate the company’s financial position to provide the group with additional fundings for exploring future development.”

Asiainfo said it will use about 40% of the money from the stake sale for new product development, while 35% will go for investments and acquisitions. The remaining 25% will be used as general working capital.

Founded in 1993, Asiainfo is one of China’s oldest private tech firms, and has been supplying China’s main telecom carriers since 1997. It went public on the Nasdaq in 2003, but later privatized in 2014. After a reorganization it relisted in Hong Kong in December 2018, selling shares for HK$10.50 apiece. Its stock currently trades slightly below that level, closing on Thursday at HK$10.36, giving it a market capitalization of just under $1 billion.

The company’s Chairman Tian Suning, also known as Edward Tian, is sometimes called the “father of China broadband.” Besides founding Asiainfo, he was also previously an executive at China Netcom, an earlier state-run carrier that was later merged into China Unicom.

Revenue from Asiainfo’s core software business grew about 10% to 5.7 billion yuan last year, while its profit for the year roughly doubled to 409 million yuan.

Contact reporter Yang Ge (geyang@caixin.com; twitter: @youngchinabiz)