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China Mobile Ltd. (941), sitting on more cash than Apple Inc. (AAPL), is missing the phone industry’s cheapest stock valuations in two years, fueling investor discontent over its takeover strategy.
Shares of Telefonica SA (TEF), Spain’s biggest phone company, are nearing their least expensive levels relative to estimated earnings on record as stocks in the MSCI World Telecommunication Services Index trade at their lowest multiples since July 2009, data compiled by Bloomberg show. China Mobile’s cash is better spent on network upgrades at home, Chairman Wang Jianzhou said.
“We do have a strategy but we do not have targets,” Wang said in an interview in Dalian, China. “We try to find some new opportunities for investment, including overseas investment. We think the purpose of any acquisition is to increase new value to our shareholders.”
Wang’s reluctance to buy highlights the diverging views between the world’s biggest phone carrier, flush with more than $50 billion in cash, and minority shareholders who say the company should pursue assets or give money back. Facing slowing subscriber growth at home, China Mobile has yet to make an overseas acquisition and its last major purchase was buying 20 percent of Shanghai Pudong Development Bank (600000) Co. last year, according to Bloomberg report.
“The worst thing they could do is sit on cash and watch it go up and up, or buy assets in China like recapitalizing banks,” said David Fergusson, a fund manager at Woodside Holdings Investment Management in Singapore. “What they need to do is take a long look at buying European telcos. Telefonica, wow, that’s cheap.”