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SCMP Reporter

Hutchison Whampoa's plans to sell down the 90.1 per cent interest it has in its British third-generation (3G) mobile-licence joint venture are being viewed as a means for the company to lower its risk profile, while providing a route for other mobile companies to enter the market.

Hutchison will sell 35 per cent of its holdings for up to three billion euros (about HK$22.2 billion) to Dutch mobile operator KPN - which is interested in 15 per cent - and Japanese mobile group NTT DoCoMo, which wants 20 per cent, say sources.

An announcement is expected by Friday, they said.

This would leave Hutchison with a 58 per cent stake, and Telesystem International Wireless, its Montreal-based partner in TIW UMTS, with 7 per cent.

Officials from Hutchison, DoCoMo and KPN all declined to comment on the deal, but KPN did confirm it was looking jointly with Hutchison and DoCoMo at ways to break into the emerging European 3G mobile market.

The three companies know each other well, given that DoCoMo already has a 19 per cent interest in Hutchison Telecom in Hong Kong, and a 15 per cent stake in KPN.

They also have shown strong ambitions to build pan-European mobile networks, and KPN has publicly pledged that it aims to become Europe's No 3 mobile company behind France Telecom and Vodafone AirTouch.

DoCoMo has similarly long been rumoured to be looking at ways to expand in Europe, and Hutchison, aside from its 3G licence in Britain, is also bidding for licences in the Netherlands, Germany and Belgium.

Analysts believe however that in all these bids, Hutchison is looking to share ownership, just as it did after launching Orange, the British 2G mobile operator, which was floated on the London Stock Exchange two years after the service was launched.

'Hutchison is at heart a trading company. That is what it does best,' said John Tysoe, telecoms analyst at West LB Panmure.

'It has in recent years developed an ability to grow and create new business, but in essence it is a trading business, and so there is no sentiment associated with the ownership of these things.' The financial commitment required for building up 3G networks is also a sizeable undertaking that Hutchison is reluctant to do on its own.

It is already backing the GBP4.4 billion (about HK$51.9 billion) cost for the British 3G licence, and victory in the German 3G auction could mean even greater expenditure. Once a licence has been won, the cost of building a 3G network is equally prohibitive, with Hutchison estimating that the cost in Britain alone will be a further GBP5 billion.

Not only will KPN and DoCoMo help to spread the cost, but building an alliance with Hutchison means they could also be given the chance to participate in other licence bids.

But some analysts question whether becoming involved in the British market at this stage will be profitable.

'Personally, I don't think it has been proved that it is a value-enhancing move,' said Kevin Fogarty, telecoms analyst at Daiwa SBCM Europe.

'People are paying a lot for these licences and want to see a return on their investments.' He said players like KPN and DoCoMo had no experience in Britain, no brand name, and faced sizeable financial outlay.

'The obstacles are stacked against them,' Mr Fogarty said.

But he agreed that with few other opportunities, the two companies would have had little choice, and reports that Hutchison is seeking equity partners for a holding company containing all its 3G licences, would have made the proposition doubly attractive.

'I think it is feasible, especially given the point that both DoCoMo and KPN would combine in other markets, and significantly advance their presence.' 



Hutchison eyes partners in bid to spread expense of European 3G foray