Hutchison Whampoa
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more

Hutchison to pay $4.4b penalty

The holding company of Hutchison 3G Italia, controlled by Hutchison Whampoa, has been ordered by an arbitration court to pay ?423.3 million ($4.4 billion) to a unit of Italian company Cirtel International (CIR) following a dispute over financing for the European mobile phone operator.

Of the amount, ?373.3 million was related to financing provided by CIR to help H3G Italia pay for a third-generation mobile-phone licence in 2000 while the rest was interest.

Saturday's ruling came after Hutchison had won the first round of the arbitration in 2002, when a court rejected a bid by CIR to recover the ?380 million it had invested in the mobile-phone operator. The judge rejected CIR's application for an interim order freezing assets in H3G Italia.

H3G Italia, now 88.2 per cent owned by Hutchison Whampoa, was formed when a Hutchison-led consortium won the 3G licence in 2000. CIR was a founding member of the consortium.

The dispute relates to a row between H3G Italia and CIR over whether the latter's financing for the licence should be automatically converted into capital in H3G Italia - something CIR refused to accept.

The arbitration began in July 2001 when CIR, then a 15 per cent stakeholder of H3G Italia, asked to cash out and sold a 2.1 per cent stake back to Hutchison.

CIR, which controls many Italian media assets, thought the capital it invested was shareholder loans, while Hutchison said it was equity investment that did not require immediate payback.

However, according to a statement issued by Hutchison yesterday, the International Court of Arbitration of the International Chamber of Commerce has also ruled that CIR will be obliged to provide continuous financing of the same amount to H3G Italia.

'Hutchison and H3G are very pleased with the ruling,' said the statement. 'The board of H3G Italia will meet shortly to consider the manner of exercise of its right to call on CIR for funding of its share of the licence cost of [?373.3 million] for working capital purposes, as well as the corresponding repayment of CIR's outstanding loans in accordance with the ruling.'

The senior managers at both Hutchison and CIR could not be reached for comment.