China Mobile has entered into talks to buy a stake in Shanghai Pudong Development (SPD) Bank as the state-owned giant looks to diversify its business and tap the lucrative m-payments market.
Trading in the bank's shares were suspended on Friday as speculation mounted about an investment of up to $5.9 billion for a 20% stake from China Mobile. Yesterday the telco confirmed talks are in progress over the subscription of new shares and potential strategic cooperation.
Wang Jianzhou, chairman, China Mobile, told local reporters that the deal would help its push into mobile commerce, which requires cooperation with banks.
However, the strategy has elicited scepticism, with Christopher Wong, a fund manager at Aberdeen Asset Management telling Bloomberg that you "don't need to buy a bank to get into mobile banking".
Meanwhile, the firm's nearest competitor China Unicom does not appear set to follow suit. Asked whether he planned a similar investment, chairman Chang Xiaobing told Dow Jones "every company will take their own road".
The market also reacted poorly, with shares in China Mobile falling 2.4% in Hong Kong to their lowest level in two months.