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Hutchison Shares Bear Brunt of German Venture Pull-out
Hutchison Whampoa shares fell 3.8 per cent Fridayin Hong Kong on investor disappointment at the company's withdrawal from a joint venture that had just won a licence to operate third-generation (3G) mobile-phone services in Germany, according to brokers.
The counter finished at HK$113.50 on heavy turnover of HK$17.6 billion.
Hutchison said it sold a 50 per cent stake in E-Plus Hutchison to Netherlands-based KPN Mobile because the 8.39 billion euro (about HK$59.86 billion) price for the licence was too high.
"As a new entrant to the German market, the cost of the licence is higher than Hutchison had anticipated," managing director Canning Fok Kin-ning said.
Of the pull-out from the 3G venture, chairman Li Ka-shing said: "Everything has a price. We care about a project getting a fair return."
After the transaction, KPN will own 50 per cent of the 3G venture, and Germany-based E-Plus the remainder. KPN has a 77.5 per cent stake in E-Plus.
Last month, Hutchison sold 35 per cent of its 3G venture in Britain to KPN and Japan-based NTT DoCoMo for US$3.2 billion.
Despite the sale of Hutchison's stake in the German 3G venture, Mr Li said the company had not abandoned plans to form a pan-European 3G network. He said Hutchison could still rent spectrum from the venture and operate in Germany.
However, analysts questioned whether Hutchison could now become a serious contender for operating a pan-European 3G network given the bandwidth constraints in Germany.
"The pull-out raises uncertainties about Hutchison's strategy for a pan-European 3G network in the medium term," ABN-Amro analyst Eddie Lau Kwok-lap said.
"It is difficult to create a major alliance that is needed to put together a network."
Breaking away from KPN also raised concern among analysts about whether other 3G ventures in Europe by Hutchison would go ahead, but company officials said this worry was unwarranted.
"Market attention now will turn to how Hutchison secures a licence in France and Italy," an analyst said.
In the past three months, Hutchison secured partnerships in France, Belgium and Sweden. Its recent move to take a stake in Andala, an Italian company preparing for the country's 3G auction, bolstered investor sentiment towards the Hong Kong counter by spurring hope it was set to tap into another main market.
Some analysts said Hutchison showed good judgment by withdrawing from the German 3G venture.
In addition to the high licence price, they said a huge amount of capital would be needed to get the operation off the ground.
"I think [the move] showed good financial discipline by Hutchison, and how management preserved shareholder value," HSBC analyst Carl Wong said.
He said the cost of the German 3G licence by population and megahertz was 47 per cent higher than the one obtained in Britain by the Hutchison venture there.
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