Reality check

Under pressure from investors to streamline its operations, Vodafone sold this week its 3.2% stake in China Mobile – SK Telecom, which had acquired 3.3% of China Unicom, sold its entire stake last year.

The honeymoon between Vodafone and China Mobile has lasted a decade and that’s not too bad for a foreign investor in China, particularly when managing to make a healthy profit with the operation (more than doubling its investment). The marriage was no doubt promising. The world’s two largest mobile operators working hand in hand to develop global standards and markets at home and abroad. But the the initial hope to own 15-20% of China Mobile at some point and to be granted a license to operate in China had to meet with the reality of the ground. In spite of its listing on the Hong Kong and New York stock exchanges remains – and probably for quite some time – a firm tightly controlled by the government.

Constructive engagement “à la Vodafone” may have run its natural course. As time goes by, the value proposition to partner with a foreign operator has become less and less attractive. The 3 Chinese telecom operators sit on piles of cash, allowing them to acquire any technology (or company) they need. In a not-too-distant future they may even start to threaten more mature markets, something that had just become easier now that the strategic investor left.