4c6ebde9-2586-46b8-99f4-ac5508796340.pdf

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CHINA MOBILE LIMITED

中國移動有限公司

(Incorporated in Hong Kong with limited liability under the Companies Ordinance)

(Stock Code: 941)


CONNECTED TRANSACTION ACQUISITION OF THE TARGET ASSETS AND BUSINESSES FROM CHINA TIETONG TELECOMMUNICATIONS CORPORATION


Financial Adviser to China Mobile Limited



THE ACQUISITION


On 27 November 2015, CM TieTong (a wholly-owned subsidiary of the Company) entered into the Acquisition Agreement with TieTong (a wholly-owned subsidiary of CMCC), under which CM TieTong has agreed to acquire, and TieTong has agreed to sell, the Target Assets and Businesses. The Consideration for the Acquisition is RMB31.88 billion (equivalent to approximately HK$38.67 billion) and is subject to the Price Adjustment Mechanism described in the Acquisition Agreement. In addition, CM TieTong will also assume Net Debt of approximately RMB2.34 billion (equivalent to approximately HK$2.84 billion). The Price Adjustment Amount will not exceed RMB1 billion (equivalent to approximately HK$1.21 billion). The final consideration will not exceed RMB32.88 billion (equivalent to approximately HK$39.88 billion). The Consideration will be paid by CM TieTong to TieTong on the Completion Date. The Price Adjustment Amount will be paid by CM TieTong to TieTong within 15 working days after the independent auditor has submitted the audit report in relation to the Target Assets and Businesses as at the Completion Date. The payment of the Consideration and the Price Adjustment Amount will be funded by the Group's internal resources.


LISTING RULES IMPLICATIONS


TieTong is currently a wholly-owned subsidiary of CMCC, the ultimate controlling shareholder of the Company. Thereby, TieTong is a connected person of the Company pursuant to Rule 14A.07 of the Listing Rules. Therefore, the entering into the Acquisition Agreement by CM TieTong and the Acquisition itself constitute a connected transaction for the Company under Chapter 14A of the Listing Rules. As at least one relevant percentage ratio applicable to the Acquisition is or exceeds 0.1% but is less than 5%, the Acquisition is subject to the reporting and announcement requirements but exempt from the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.


WARNING: The completion of the Acquisition is subject to the satisfaction (or, if applicable, waiver) of certain conditions set forth in the section headed 'Conditions Precedent' in this announcement, and hence the completion of the Acquisition may or may not happen. Shareholders, holders of ADSs and potential investors of the Company should therefore exercise caution when dealing in the Shares, ADSs or other securities of the Company. Persons who are in doubt as to the action they should take should consult their stockbroker, bank manager, solicitor or other professional advisers.


INTRODUCTION


On 27 November 2015, CM TieTong (a wholly-owned subsidiary of the Company) entered into the Acquisition Agreement with TieTong (a wholly-owned subsidiary of CMCC), under which CM TieTong has agreed to acquire, and TieTong has agreed to sell, the Target Assets and Businesses.


THE ACQUISITION AGREEMENT


Date


27 November 2015


Parties


Seller: TieTong


Purchaser: CM TieTong

Subject of the Acquisition


Pursuant to the Acquisition Agreement, CM TieTong has agreed to acquire, and TieTong has agreed to sell, the Target Assets and Businesses. TieTong is a wholly-owned subsidiary of CMCC with thirty-one branches in all thirty-one provinces, autonomous regions and directly- administered municipalities and has engaged in fixed-line telecommunications operations. TieTong has an extensive nationwide backbone network, metro fibre, IPv4 addresses, and real property interests and land assets in thirty-one provinces, autonomous regions and directly- administered municipalities. It also has over 10 million fixed broadband and fixed line customers respectively as well as employees with substantial experience within the fixed line industry. Please refer to the section titled 'FURTHER INFORMATION ON THE TARGET ASSETS AND BUSINESSES' in this announcement for further details.


Consideration, Consideration Payment Terms and Assumption of Net Debt


The consideration for the Acquisition is RMB31.88 billion (equivalent to approximately HK$38.67 billion) (the 'Consideration') and is subject to the Price Adjustment Mechanism described in the Acquisition Agreement. In addition, CM TieTong will also assume Net Debt of approximately RMB2.34 billion (equivalent to approximately HK$2.84 billion).


The Consideration and the Price Adjustment Mechanism were arrived at after arm's length negotiations between the parties and are on normal commercial terms, with reference to various factors including, but not limited to, a valuation range determined using a number of generally accepted industry valuation methodologies and conventions, the audited value of the Target Assets and Businesses, the appraised value of the Target Assets and Businesses (based on a report produced by an independent appraiser commissioned by TieTong), the potential synergies as a result of the Acquisition, the prevailing business conditions and growth prospects of the Target Assets and Businesses, standard commercial terms, and other considerations such as those that arise during the normal course of negotiations.


The Consideration will be adjusted in accordance with the Price Adjustment Mechanism. The adjustment to the Consideration is primarily driven by the impact of the changes in working capital, capital expenditure, depreciation and liabilities etc. of the Target Assets and Businesses on its audited book value of the net assets during the Relevant Period. CM TieTong and TieTong agreed that the Price Adjustment Amount will not exceed RMB1 billion (equivalent to approximately HK$1.21 billion). The final consideration will not exceed RMB32.88 billion (equivalent to approximately HK$39.88 billion).


The Consideration will be paid by CM TieTong to TieTong on the Completion Date. The Price Adjustment Amount will be paid by CM TieTong to TieTong within 15 working days after the independent auditor has submitted the audit report in relation to the Target Assets and Businesses as at the Completion Date. The payment of the Consideration and the Price Adjustment Amount will be funded by the Group's internal resources.

Conditions Precedent


The completion of the Acquisition is subject to the satisfaction of the following conditions:


  1. the Acquisition Agreement becoming effective;


  2. all the representations and warranties provided by TieTong pursuant to the Acquisition Agreement on the date of the Acquisition Agreement remain true, accurate, intact and in all material respects do not mislead, be deceptive or have omissions as at the Completion Date;


  3. TieTong has performed and complied with all of the obligations, agreements and conditions which it had agreed to perform or comply with prior to the Completion Date under the Acquisition Agreement;


  4. there has been no material adverse change with respect to the condition of the Target Assets and Businesses;


  5. the transactions contemplated under the Acquisition Agreement have been approved by the board of directors and shareholders of TieTong in accordance with the constitutional documents of TieTong and all applicable laws and regulations;


  6. the transactions contemplated under the Acquisition Agreement have been approved by the board of directors and shareholders of CM TieTong in accordance with the constitutional documents of CM TieTong and all applicable laws and regulations; and the Company has obtained the necessary approvals in respect of the transactions contemplated under the Acquisition Agreement pursuant to its constitutional documents, all applicable laws and regulations and the Listing Rules; and


  7. the necessary approvals, permits or authorisations from government authorities in relation to the Acquisition have been obtained.


CM TieTong and TieTong have agreed to use their reasonable endeavors to fulfil all of the above conditions as soon as practicable before 31 December 2015. If any of the above conditions have not been fulfilled before 31 December 2015, CM TieTong and TieTong may (subject to practical feasibility) agree in writing to (a) agree to proceed with the completion on another date, or (b) waive the satisfaction of such condition(s). Any conditions being waived pursuant to the Acquisition Agreement shall be regarded as being fulfilled.


Completion


Subject to the satisfaction (or, if applicable, the waiver) of the conditions set out above, the completion of the Acquisition is expected to take place on 31 December 2015. In the event that any of the conditions as set out above are not satisfied (or, if applicable, waived) before 31 December 2015, CM TieTong and TieTong shall negotiate in good faith and agree on another Completion Date.

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