Hutchison to raise $1.13 billion in IPO to fund global 3G operations

September 21, 2004

Hutchison Telecommunications International (HTIL), Hutchison Whampoa's telecom unit, expects to raise as much as US$1.13 billion from a public offering in the US and Hong Kong in October.

Hutchison Whampoa has identified the HTIL IPO as a way to offset losses from its expensive 3G wireless operations, which accumulated losses before interest and taxes of HK$12.2 billion in 2003.

The IPO would help Hutchison grow its 3G subsidiaries in ten countries including UK and Italy, its two biggest markets, as numbers suggest the customer acquisition rate is picking up.

The Hong Kong conglomerate said it will offer US$1.155 billion shares or 25% of the unit's 4.5 billion shares, at a price range of HK$6.59-7.63 a share. The price range would value Hutchison Telecom at between US$3.8 billion and US$4.4 billion.

The price per American Depositary Share of Hutchison Telecom will be between US$12.67 and US$14.67, Hutchison said Monday.

Hutchison Whampoa has invested HK$20.8 billion in Hutchison Telecom through shareholder loans, and will remain the majority shareholder of Hutchison Telecom after it is listed, holding about 75%.

Japan's NTT DoCoMo, which withdrew from the H3G UK venture with Hutchison in May, will get 3.29% to 3.81% stake in Hutchison Telecommunication. Hutchison Whampoa said it would pay DoCoMo in cash and shares when the Japanese telecom surrendered its 20% stake in H3G UK.

Hutchison Whampoa's involvement in 3G wireless technology has been controversial among investors almost from the start. The firm eventually expects 3G to offer greater return on capital than any of its existing businesses, but so far it has hindered its share price. Only recently has things started looking better. In July, it added 697,700 3G customers globally that had taken its total worldwide subscribers to 3,256,300 in August. The average cost of acquiring a customer also dropped to 252 euros, compared to 299 euros in the first seven months of 2004. Analysts had been putting question mark over Hutchison's 3G future but some are now foreseeing a more bullish outlook for the company.