Hutchison jumps on talk it may sell Italian 3G unit
Hutchison Whampoa shares surged yesterday on speculation the ports-to-telecommunications conglomerate will sell its Italian 3G unit, a sign it may be preparing to cut its losses on high-speed mobile-telephone operations in Europe.
The stock climbed as much as 8.28 per cent - its biggest intraday rally since 2000 - after the Times of London reported the company was seeking potential bidders for its Italian division.
Hutchison closed 6.16 per cent higher at HK$80.15, with HK$4.49 billion worth of shares changing hands, helping the blue-chip Hang Seng Index reach a new record. A Hutchison spokesperson declined to comment on the report.
Li Ka-shing's technology flagship has lost HK$120 billion on its investment in 3G technology since 2002, excluding interest charges and tax payments.
The company has been hit particularly hard in Italy, its largest global market by number of users, where a new regulation bans mobile operators from charging pre-paid card users a fee for adding value to their telephone cards.
Quoting industry sources, the Times said the Italian assets could attract bids from Deutsche Telekom and France Telecom as both companies had been seeking to expand their presence in the European 3G sector.
The paper said a sale or flotation of the Italian business by Hutchison, which is already in discussions about hiving off its transmission towers, could also be a precursor to an exit from its 3G operations in Britain.
'It should be good news for Hutchison as the 3G business will not be able to generate positive cashflow for the group for the next two years,' said a fund manager at a European asset management firm.
3 Italia attempted to list shares on the Milan exchange early last year, but failed due to a valuation dispute between sponsors and the issuer.
Instead of the planned offering, Hutchison sold 10 per cent of the shares to Goldman Sachs for Euro420 million (HK$4.53 billion) through a private placement.
Investment bank Morgan Stanley said in a report that a sale of 3 Italia was probably premature.
Third-generation networks can offer services such as video conferencing and faster downloads of music and movies for mobile telephones.
'An outright sale of 3 Italia seems unlikely after the weak first half and the deteriorating operating environment,' the bank said.
Hutchison is exploring opportunities to sell its transmission towers to other operators in Italy, such as Wind, and then lease them back to minimise total operating costs.
Hutchison's 3G losses peaked in 2004 at HK$38.45 billion. They narrowed 6 per cent in 2005 and 45 per cent last year.
However, losses for the first half of this year narrowed 6 per cent to HK$11.32 billion.
