Hutchison Telecom shares rise on divestment of fixed-line business
Sale marks latest foray by infrastructure funds and private equity companies in the highly competitive fixed-line network market in Hong Kong
Hutchison Telecommunications Hong Kong, the city’s second-largest mobile network operator, saw its shares surge as high as 9.8 per cent in trading on Monday after the company moved to divest its fixed-line business for HK$14.5 billion (US$1.9 billion) in cash.
Hutchison Telecom, a unit of Li Ka-shing’s CK Hutchison Holdings, announced on Sunday the sale of fixed-line network unit Hutchison Global Communications (HGC) to Asia Cube Global Communications, which is now owned by a fund that is managed by New York-based I Squared Capital.
Shares in Hutchison Telecom rose to HK$3.22 before losing steam to close at HK$3, up 6.8 per cent.
“The [HGC] deal reflects the changing shape of the telecommunications market, where there has been significant activity recently in Hong Kong,” said Hilary Lau and Mark Robinson of international law firm Herbert Smith Freehills in a statement.
Herbert Smith Freehills advised I Squared Capital on the acquisition, which marks the first telecommunications investment for the independent global infrastructure investment manager.
The company is mostly focused on energy, utilities and transport deals in North America, Europe and select high-growth economies.
I Squared Capital beat a competing bid for HGC from private equity companies TPG Capital and MBK Partners, who were considered the early front runners.
“Infrastructure funds and private equity companies are seeing increasing opportunities in network infrastructure,” said Lau, the Hong Kong corporate partner at Herbert Smith Freehills, and Robinson, the firm’s head of telecommunications, media and technology.
That trend surfaced last year when San Francisco-based TPG, one of the world’s largest private equity firms, teamed up with Seoul-based MBK to buy fixed-line network operator Wharf T&T for HK$9.5 billion from property giant The Wharf (Holdings).
HGC’s sale is expected to close this October.
Lau and Robinson also said telecommunications companies are “taking different strategies in order to invest in network upgrades and digital advances”.
Hutchison Telecom said proceeds from the disposal of its entire stake in HGC will be used for investment in its mobile network.
In April, Hutchison Telecom said it was working with Huawei Technologies, the world’s largest telecommunications equipment supplier, on a series of infrastructure upgrades to prepare its “Three” brand mobile network for the roll-out of 5G services in Hong Kong.
The upgrades will be made ahead of the release of new spectrum for 5G and the universal standard for this advanced mobile system, according to Hutchison Telecom chief technology officer Daniel Chung Yiu-man.
Phil Sorsky, a vice-president at network infrastructure provider CommScope, said telecommunications operators are sharpening their focus on mobile networks to meet growing demand.
“According to our latest survey in Hong Kong, 73 per cent of millennials prefer to consume media via smartphones over cable TV,” Sorsky said.