Hutchison Whampoa's on-going dispute with Dutch telecommunications firm KPN could force the Hong Kong conglomerate to write down the value of its British third-generation (3G) mobile phone operation - a move that the company has long resisted. Hutchison's dilemma emerged on day after the company confirmed it had asked an independent bank to value its 65 per cent-owned subsidiary 3UK within 30 days. KPN holds a 15 per cent stake in the venture. The valuation request is the first step in a process aimed at forcing KPN out of 3UK. KPN angered Hutchison in March by refusing to participate in a ?1 billion (HK$13 billion) cash call for the 3G start-up. In a High Court writ filed on June 2, Hutchison demanded that KPN pay its ?150 million share of the cash call. KPN responded by claiming unspecified damages from Hutchison, and asked that the Hong Kong company buy its 15 per cent stake in 3UK at a 40 per cent premium to 'fair price'. On receipt of the bank's assessment Hutchison can serve KPN with a dilution notice, effectively lowering the value of the Dutch firm's stake in 3UK and making it cheaper to acquire. Also, the lower the valuation, the less Hutchison would have to pay for KPN's stake. However, a low valuation of KPN's 15 per cent stake would diminish 3UK's total value. 'Hutchison is facing a dilemma - if the valuation is low, it will pressure Hutchison to write down the 3G assets on its balance sheet,' ING Securities' Cusson Leung said. 'If the valuation is high, it may not be as worthwhile a deal because Hutchison will have to increase its 3G exposure.' A Hutchison spokeswoman said yesterday: 'Our 3G business in Britain is doing well. We will not write down our investment. 'We have not made any decision regarding the purchase of KPN Mobile's stake in 3UK, which will depend on the litigation and other considerations.' Hutchison paid ?4.38 billion for its British 3G licence in April 2000. It recouped ?2.1 billion of that outlay by selling 15 per cent and 20 per cent stakes to KPN and Japan's DoCoMo, respectively. Some analysts estimated the book costs of Hutchison's British 3G investment were at least four billion euros (HK$35.97 billion), including a 3.2-billion euro licence cost and its share of total network expenditure, which was budgeted at 4.5 billion euros. A valuation of below 600 million euros for KPN's stake in 3UK would suggest the company was worth less than four billion euros. Hutchison would then be forced to make a provision equal to the difference of its four-billion-euro book costs and the venture's new, lower valuation. Daiwa Securities head of research Jonas Kan said that whether Hutchison chose to write down its British investment would ultimately be a management decision. That, in turn, would depend on whether the conglomerate thought the value diminution would be permanent. 'Given the negative sentiment towards Hutchison's 3G venture, perhaps it would be best for Hutchison to write down and clear up the uncertainty,' Mr Kan said. In its annual report, Hutchison valued its nine 3G licences worldwide at $129.58 billion, or 31 per cent of the company's total assets. For these licences the company paid $88.51 billion.