Chinese Market Gets Tough for Britain's Vodafone.

Byline: Ray Heath

Nov. 14--A year ago Vodafone chief executive Sir Christopher Gent pulled off what some said could be the telecoms deal of the century -- buying a 2 percent stake in cellphone giant China Mobile.

Last week, Gent was back in China opening a new Vodafone office in Beijing, and predicting a great future for the Chinese mobiles market and Vodafone's role in it.

Yesterday Vodafone wrote UKpound 300 million off the value of its stake in China Mobile.

What went wrong? When Vodafone bought its stake, China Mobile was the darling of the Hong Kong stock market, where it is quoted. Analysts were putting out buy notices like confetti, and extrapolating impressive figures for mobile phone usage in the world's most populous state.

The shares had soared from HK$8.90 in November 1998, to HK$59 when Vodafone moved in. They have not seen that price since, and the global impact of the 11 September attacks on the US brought them down to HK$19.40. They have recovered to about HK$25, but the glamour has gone.

The lesson learned by analysts and the investors who followed their advice is that nothing is as it seems in China. However, it is true that the mobile phones market is huge. At the end of July, Beijing officials claimed that the total Chinese market was bigger than America's at 120 million users, 42 percent up on the year.