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Ben Kwok

Hutchison Whampoa is poised to record a HK$75 billion exceptional gain after agreeing to sell its 22 per cent stake in United States mobile operator VoiceStream Wireless to Deutsche Telekom.

The German telecommunications giant said yesterday it was acquiring VoiceStream for US$55.7 billion, or roughly US$200 a share, to secure a foothold in the US.

The deal presents Hutchison with a sevenfold return on its investment made three years ago in the US company.

Hutchison, controlled by Li Ka-shing, is set to post its third consecutive year of huge exceptional gains.

It sold Britain-based Orange to Germany's Mannesmann for HK$113 billion last year, and a 10 per cent Mannesmann stake to Vodafone AirTouch of Britain for HK$50 billion this year.

Hutchison will reap US$1.6 billion cash and own 179 million shares, or 4.6 per cent, of Deutsche Telekom after the transaction is completed in the first half of next year.

It will book the profit from the transaction then.

'Hutchison made another splendid global telecoms deal after selling Orange,' CLSA analyst Edison Lee said.

'That tells a lot about the group's foresight and the asset trading nature.'

Deutsche Telekom agreed to pay US$30 cash for each VoiceStream share plus 3.2 of its shares for each VoiceStream share.

In other options, VoiceStream shareholders may elect to receive either US$200 cash for each share held or 3.7647 Deutsche Telekom shares.

Hutchison, which owned 23.4 per cent of VoiceStream before the exercising directors' options and convertibles and 22 per cent afterwards, will opt for the cash- and-share option.

At the end of the transaction, Hutchison will be the second-largest shareholder in Deutsche Telekom after the German Government, which will own 45 per cent of the company.

A Hutchison spokesman said the company's stake in Deutsche Telekom would not hinder its bid for a third-generation (3G) mobile licence in Germany because the company would not become a substantial shareholder until next year.

However, she added Hutchison had agreed to a complicated lock-up period in which the company would be allowed to dispose of Deutsche Telekom shares in stages.

Analysts estimated Hutchison could net HK$22 billion in gross cash after the transaction is completed and end up with substantial stakes in Europe's two largest telecoms companies.

Hutchison holds 3.5 per cent of Vodafone.

But they said the disposal of the company's VoiceStream holding raised questions about its global strategy.

In addition to its Deutsche Telekom and its Vodafone stakes, analysts pointed out Hutchison also owned 58.5 per cent of a pan-European 3G network.

'That means the company is placing all its eggs into the European basket,' an analyst said.

'It's a good exit price, no doubt about it,' said Anil Daswani, head of Hong Kong research for Salomon Smith Barney.

'But I don't like them being out of the US wireless business.'

Hutchison yesterday said it 'will continue to explore alternatives for participation in the US telecommunications business, in particular in 3G wireless opportunities'.

'We are cashing out of the US second-generation market. But we will keep an eye on the 3G market,' a Hutchison spokesman said.

The share prices of Hutchison and Deutsche Telekom dropped after the purchase of VoiceStream was announced.

Hutchison fell 3.64 per cent yesterday on heavy turnover worth HK$1.14 billion.

In Frankfurt, Deutsche Telekom slid 8.4 per cent to 50.5 euros. It fell 16.5 per cent, wiping out more than 25 billion euros(about HK$181 billion) in value in four trading days.

presence, Page 8



Hutchison in line for $75b gain