Hutch Accelerates UK Buy-Out

May 10, 2005 - source: BWCS

Hong Kong based conglomerate Hutchison Whampoa is to speed up the buy-out of its partners in its UK 3G business. The move, which is expected to cost Richard Li Ka-shing's company £210 million, is seen by some analysts as heralding the first step towards a sale of its British phone business.

Hutchison has long planned to purchase the 20% of 3 owned by NTT DoCoMo and the 15% stake which still belongs to Dutch operator KPN, however, it was not expected to complete the deal until 2007. The two buy-outs are now expected to be complete by the end of next month.

The ports-to-mobile group says it will be able to book a net profit of approximately HK$9.4 billion (US$1.2 billion) by removing the credit on its balance sheet relating to the two carriers' minority holdings in the loss-making UK 3G business. The profit will equate to the difference between the amount Hutchison will pay to the two operators and the credit balance that reflects those minority holdings on its books.

For the financial year 2004 Hutchison managed to boost its net profit to HK$16.13 billion (an increase of 38%), chiefly by selling off HK$19.18 billion worth of assets. This move helped offset heavy losses from its nascent 3G businesses. For the current financial year, the company is expected to reach a net profit figure of some HK$7.2 billion.

From DoCoMo's perspective the deal, which was agreed last year, will represent a loss of around 90% on its original investment. Hutchison had reached an agreement with KPN to pay £90 million for its 15% stake back in 2003. KPN paid euros 1.2 billion (US$1.54 billion) for its holding in 2000.