Hutchison buys 3G stake for US$631m
Hutchison Whampoa said yesterday it paid 469.55 million euros (US$631.5 million) to buy a 1.6 per cent stake in its Italian 3G mobile phone venture and to repay a loan from CIR unit Cirtel.
Hutchison Managing Director Canning Fok also said at a news conference that the company aims to list the Italian business in 2005.
He said the deal with Cirtel includes about 40 million euros (US$54 million) to purchase the Italian company's 1.6 per cent stake in H3G Italia, raising the Hong Kong conglomerate's stake to about 90 per cent from 88 per cent.
Fok said that the transaction has incurred no loss to the group and it remains to be seen whether there will be a profit recorded from the deal. He added that based on this transaction the book value of H3G Italia should be 4.2 billion euro (US$5.7 billion).
Cirtel said in a statement the 1.6 per cent stake had a value of 53.4 million euros (US$72 million) on its books.
The deal also includes repayment of a 373.3 million euro (US$504 million) loan made by Cirtel to the venture, Hutchison 3G Italy, that was used to help the start-up carrier pay for a third-generation mobile licence in 2000.
Hutchison, controlled by Asia's richest tycoon, Li Ka-shing, has been the most aggressive investor in European 3G telecoms, although its rivals have recently been rolling out their own offerings.
Earlier this month, an arbitration tribunal ordered Hutchison Whampoa to pay 423.3 million euros (US$571 million) to Cirtel to cover the loan plus interest.
Hutchison had wanted to repay the loan using equity in the 3G venture, while Cirtel wanted cash.
"I am very satisfied with the agreement we have reached, which provides the CIR Group with substantial financial resources that will be used to develop our operating companies," CIR Chief Executive Officer Rodolfo De Benedetti said in a statement.
Separately, Hutchison said it is planning an initial public offering for Hutchison 3G Italy as soon as next year. Hutchison's Fok said investment banks are now pitching for the planned deal.
"To be conservative, I think it would happen later next year," he told reporters.
Hutchison has spun off its emerging market telecom unit this year and also plans to list its fast-growing Indian business next year.
The Italy venture's Chief Executive Vincenzo Novari previously said Hutchison 3G Italy was set to make its first positive earnings before interest, taxation, deprecation and amortization (EBITDA) in 2005, giving it the right kind of financial performance for a stock market listing.
Fok said that Hutchison's worldwide 3G business, which includes networks in Italy, Britain, Australia and a number of other markets, expects to report 6.5 million subscribers by the end of this year.
This is roughly in line with forecasts by investment banks. Merrill Lynch has predicted that the company would have 6.38 million 3G subscribers by the end of this year and Goldman Sachs recently raised its current-year forecast for 3G subscribers by 5 per cent to 6.8 million.
Italy is the largest of the company's individual 3G markets, with about 2.6 million subscribers.
Its UK 3G operation has secured nearly 2.5 million subscribers and its Hong Kong market currently has 210,000 users, according to Fok.
Hutchison Chairman Li Ka-shing has said that the firm's 3G business was on track to reach breakeven on an EBITDA basis in 2005.
Shares of the conglomerate climbed 2.15 per cent yesterday to HK$71.25, after rising 11.6 per cent in the past three months.