Special distribution of HK$6.75 per share on the cards after Indian unit's disposal
Hutchison Telecommunications International Ltd (HTIL) would pay a special dividend of HK$6.75 per share from the HK$85.9 billion sale of its 67 per cent stake in an Indian mobile operator to Vodafone Group of Britain, the firm said yesterday.
Hutchison Whampoa, controlled by Li Ka-shing, is expected to receive HK$15.77 billion from the distribution, based on its 49 per cent interest in Hutchison Telecom.
In addition to the HK$32.2 billion distribution to shareholders as soon as August, HTIL would use HK$14 billion from the sale to pay down its debt while retaining the remaining HK$39 billion for business development in new markets, chief executive Dennis Lui Pok-man said yesterday.
The plans are subject to completion of the deal. 'Valuations for emerging market telecommunications assets could cool in the next 12 to 24 months,' Mr Lui said. 'Our balance sheet leaves us in a good position to pursue other opportunities.'
He said that the company might also speed up investments in its new businesses in Vietnam and Indonesia.
The day after the sale of Hutchison Essar was announced last week, HTIL shares sank 15 per cent, the largest fall since the company listed in October 2004, on investor uncertainties surrounding the company.
The stock has since stabilised, closing up 2.56 per cent at HK$17.64 yesterday before the announcement.
Market watchers believe the shares are likely to surge today due to the distribution. Last year, property investor Great Eagle's shares surged more than 12 per cent after it announced a special HK$5 per share dividend from the sale of Citibank Plaza to a real estate trust.
After the sale of India's No4 mobile operator, Hutchison Telecom will have operations in eight markets, including Hong Kong and Israel.
The company said on Wednesday that its operating profit of HK$3.6 billion in the first nine months of last year included HK$2.61 billion from Hutchison Essar. Its next largest contribution was from its 51 per cent-owned Partner Communications in Israel with operating profit of HK$1.28 billion.
The company's five other units posted a combined operating loss of HK$286 million in the period, according to the statement. It began services in Vietnam last month and is scheduled to launch in Indonesia next month.
'Vietnam would be a potential growth catalyst for Hutchison Telecom due to the low penetration in mobile service there. But in the short term, the company's stable interest income from the proceeds of the sale would also support the share price,' Everbright Securities analyst Wong Chi-man said yesterday.
Hutchison Telecom will be in a net cash position of HK$65.3 billion after the sale, from a net debt of HK$35.8 billion before the sale.
It is expected to record a disposal gain before tax of HK$75 billion or HK$15.75 per Hutchison Telecom share.
Mr Lui said the company had no plan to sell its operations in Hong Kong and Israel, nor buy any of the European 3G mobile businesses from its parent Hutchison Whampoa. He also said the parent did not intend to de-list the soon-to-be cash rich subsidiary.
In the prospectus for its October 2004 initial public offering, Hutchison Telecom said it would not distribute dividends but instead retain all its earnings to finance the expansion of its businesses.