Hutchison Whampoa endorses Essar sale
Telecommunications unit will seek shareholder approval on March 9
Hutchison Telecommunications International will seek shareholder approval on March 9 for the sale of its 47 per cent stake in its Indian mobile business, Hutchison Essar Group, the company said in a transaction circular yesterday.
The sale, in which the Hutchison Essar stake is being bought by UK-based mobile operator Vodafone Group for HK$86.5 billion cash, is also subject to approval from the Foreign Investment Promotion Board of India's Ministry of Finance.
Hutchison Whampoa, which holds 49.66 per cent of Hutchison Telecom through various wholly owned subsidiaries, will vote in favour of the transaction at the extraordinary shareholders meeting next month, the circular said.
'[Hutchison Whampoa] has given the irrevocable undertakings to [Vodafone] to vote in favour of the resolution to be proposed to the shareholders at the meeting to approve the transaction,' Hutchison Telecom's chairman Canning Fok Kin-ning wrote in the circular's 'Letter from the board'.
'We need a simple majority of votes in favour of the transaction at the shareholders' meeting,' a Hutchison Telecom spokesperson said yesterday, adding that Hutchison Whampoa was able to cast the vote in the meeting.
Market watchers said that given Hutchison Whampoa's supporting vote, the deal should gain approval at the meeting.
Investors remain unclear on what Hutchison Telecom will do with the one-time disposal gain from the deal. Hutchison Telecom will book a HK$75 billion one-time pre-tax gain from the disposal in its 2006 full-year financial results.
The company has not indicated a final decision on the use of the proceeds.
'Appropriate portion of such proceeds would be applied toward reduction of group's indebtedness, making distributions to the shareholders by way of a special dividend and funding suitable investment opportunities,' the circular said.
Hutchison Telecom chief executive Dennis Lui Pok-man will give details on use of the proceeds at a press conference this afternoon.
'The company should distribute some dividend to its shareholders,' an analyst at a local broker said.
Hutchison Telecom operates telecommunications businesses in Hong Kong, Macau, Israel, Thailand, Sri Lanka, Ghana, Indonesia and Vietnam.
Revenue for the continued operations of Hutchison Telecom, excluding the India business, for the nine months to September was HK$13.1 billion, down from HK$24 billion with the Indian operation.
Profit for the period was HK$77.5 billion after booking profit from the disposal, according to the circular.
Shares of Hutchison Telecom rose 2.75 per cent to HK$17.20 yesterday.
Broker HSBC upgraded the shares to neutral from underweight on the proposed sale.
HSBC said Hutchison Telecom's controlling shareholders may buy all shares that it does not own at HK$19.20 per share and take the company private.