At the moment Hutchison Whampoa is keen to generate as much cash as possible in order to assist its struggling 3G mobile phone operation, Hutchison 3G. The third generation mobile network has cost a fortune to roll out in targeted countries.
Its late arrival, especially in the crowded and competitive market in Western Europe, has meant that the 3G operation is struggling to gain market share. It is suffering intense competition from the established mobile operators, looking to prevent their customer base migrating to the 3 offering.
The financial burden of this 3G operation has also been a worry to the markets and analysts, a point reinforced when the 3G operation reported losses of $2.3bn in 2003.
The proposed listing of Hutchison Telecommunications International Ltd (HTIL), which includes the fixed and mobile communications assets in Hong Kong, as well as stakes in operators in Hong Kong, India, Thailand, Israel, Sri Lanka, Paraguay, Ghana, and Macau, is expected to raise approximately $2bn, and will provide a welcome boost to Hutchison’s balance sheet.
In May, the telecoms and ports operator raised $1.76bn from the sale of its 20% stake in a joint venture with consumer products group Procter & Gamble in China.
Unfortunately for Hutchison, according to a report in the Financial Times, the Hong Kong Stock Exchange has objected to Hutchison’s application to spin off its telecoms business. According to Hong Kong Stock Exchange listing rules, a spin-off within three years of the listing of a parent company wouldn’t normally be considered.
If the IPO does not go through, it will have an impact on Hutchison’s 120m pounds ($220m) payment for the 20% stake in Hutchison 3G UK Holdings Ltd held by NTT DoCoMo Inc. Under terms of that deal, Hutchison was to pay DoCoMo in shares in HTIL, subject to the latter’s listing.
DoCoMo has the right to receive payment in cash if the HTIL IPO fails to take place, a move that will surely add unwanted pressure to the conglomerate’s balance sheet.
