Hutchison wins key telecom foothold in China
US$400m deal to buy shares in China Unicom's pending initial public offer
HUTCHISON Whampoa Ltd yesterday won a key foothold in China's rapidly expanding telecommunications sector with a deal to buy US$400 million (S$693.6 million) worth of shares in China Unicom Ltd's pending initial public offer.
Connected: deal paves the way for telecom joint ventures on the mainland between Hutchison and Unicom's parent, China United Telecoms Corp
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The deal also includes a broad cooperation framework between Hutchison and Unicom's parent, China United Telecommunications Corp, that paves the way for various mainland telecom joint ventures between the two companies.
"In particular, Hutchison and China United Telecom have also undertaken to form a technical support and consultancy co-operative joint venture in China," they said in a statement.
"The scope of the co-operative joint venture business will be nationwide, providing telecom-related consultancy and training in areas of network planning, design and optimisation, operation maintenance, marketing and sales and customer services."
The alliance with China's number two telecom provider marks the latest step in Hongkong tycoon Li Ka-shing's efforts to build a global telecommunications empire.
Hutchison, his main international investment vehicle, owns a 23 per cent stake in US-based VoiceStream Wireless Corp and has recently launched a drive to acquire third-generation mobile telecom licences across Europe.
The China deal stakes out strategic new territory for the Hongkong conglomerate ahead of foreign rivals as China prepares for World Trade Organization entry and telecom liberalisation.
"This deal is a stepping stone in China for Hutchison," said Dennis Leung, research manager at J&A Securities, adding that it would not have an immediate effect on Hutchison's earnings.
"We are very excited to be given the opportunity to invest in China Unicom Ltd. Access to the mainland market also extends our telecommunications footprint to cover most of the major markets in the world," a Hutchison spokesman said.
Hutchison shares got a late kick from the news yesterday and finished up HK$7.25 or 8.76 per cent at HK$90, after hitting an intraday high of HK$91.50. The shares outperformed the blue chip Hang Seng Index, which rose 5.17 per cent to close at 14,713.86 points.
Under the Unicom share deal, Hutchison will subscribe for US$400 million shares issued in the group's pending initial public offering in June. Unicom is expected to issue 2.459 billion shares at HK$11.50-HK$14.50 each in a flotation worth up to US$5.26 billion if overallotment options are exercised.
At the HK$13 mid-point of the pricing range, the offer would be worth US$4.1 billion excluding the allotment option. Hutchison's stake at that amount would account for about 10 per cent of the offer shares and about 2 per cent of Unicom's total share capital.
Dealing in the shares is expected to start in New York on June 21 and in Hongkong on June 22.
Cash-rich Hutchison could offer financial muscle and technical expertise to help China United Telecommunications develop US CDMA mobile phone technology, said Stanley Ng, research manager at Mansion House Research. "China's market is vast and Chinese companies will need foreign investment to back them up and Hutchison has the money," he added. -- Reuters
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