How Li puts Essar deal proceeds into use still a puzzler

Investors of Hutchison Telecommunications International can be happy that Li Ka-shing has again worked his magic and closed another profitable deal for them but now they are left wondering what will happen to the cash and how the company will replace one of its star earners.

Hutchison Telecom on Monday said it had sold its 67 per cent stake in its Indian mobile-telephone business Hutchison Essar to Britain's Vodafone Group, booking a pre-tax gain of HK$75 billion on the fast-growing enterprise.

Shares of Hutchison Telecom took a hard fall following the news of the deal even though the HK$86.5 billion price tag was seen as satisfactory and in line with expectations, with the market already having priced those gains into the shares over the past 12 months.

The company's shares made a small recovery yesterday, gaining 12 HK cents to close at HK$16.40 but they remained well below the pre-announcement price of HK$19.20 as investors worried over what would become of the cash.

'The weakness in the shares [stems from] the uncertainty over how [Hutchison] will handle the cash. We don't know how much of it they will distribute as a special dividend and how they'll use the remaining cash,' said Everbright Securities analyst Wong Chi-man.

Even though the company said all options were on the table, including using the proceeds to cut debt, to pay out a special dividend or to fund new investments, it has not committed to any plan of action, meaning hopes for a dividend payout could still be dashed.