Twitter
Advertisement

Investors dump Hutchison stock after Essar sale

Investors dumped stock in Hutchison Telecommunications International Ltd (HTIL) on Tuesday amid concerns for the company's outlook after it sold off its prized Indian assets.

Latest News
article-main
FacebookTwitterWhatsappLinkedin

HONG KONG: Investors dumped stock in Hutchison Telecommunications International Ltd (HTIL) on Tuesday amid concerns for the company's outlook after it sold off its prized Indian assets.

HTIL, subsidiary of Hong Kong telecom-to-port conglomerate Hutchison Whampoa, announced on Sunday it will sell a 67 percent stake in Hutchison Essar to British phone giant Vodafone for 11.1 billion US dollars.

At the market close on Tuesday, Hutchison Telecom extended earlier losses, tumbling 2.92 Hong Kong dollars or 15.21 percent to 16.28 dollars on concerns over its future earnings.  Hutchison Whampoa slumped 1.65 dollars or 2.04 per cent to 79.25.   

"The stock was down partly because investors are getting a bit nervous over the future of HTIL. When they sold the (Hutchison Essar) stake, they actually sold their future, the family silver," said Francis Lun general manager at Fulbright Securities.

"I don't think HTIL owns anything really valuable anymore," he said, adding some investors were also disappointed over the sale price.   

"Some expected the stake to be sold for more than 14 billion US dollars and when it was sold for much less, some punters got disappointed," he added. 

Hutchison Telecom, headed by Asia's richest man Li Ka-shing, earlier said the telecom unit would book a pre-tax gain of 75 billion Hong Kong dollars (9.6 billion US) from the sale of its stake in its Indian mobile phone firm.

The deal is expected to close in the second quarter and is conditional on approvals by Indian regulators and Hutchison Telecom shareholders, the company said in a statement.   

"This is a landmark transaction for India, the company and its shareholders," chairman Canning Fok said, noting that the transaction price represents a sizable premium on the company's investment and unlocks substantial value for our shareholders.   

HTIL said it would consider using portions of the sale proceeds to cut debt, make distributions to its shareholders by way of a special dividend and fund suitable investment opportunities including investments in existing growth markets and new markets. 

Hutchison entered the Indian mobile phone market in 1992, and analysts said the India deal could be positive for Hutchison Whampoa as it would help it reduce its debts, especially on its 3G (third generation) mobile services.

Those services have swallowed up cash at an alarming rate while producing no early returns.    Some analysts also believed the sale was well timed and may open up other potential deals with the British firm, and even help it exit the troubled 3G business. 

The conglomerate's profits have been dragged down by billions of dollars in losses from its troubled 3G operations since 2002. Hutchison recorded a 12 billion Hong Kong dollar loss at the 3G group in the first half year of 2006.

On Tuesday, Fitch Ratings said the sale will not affect Hutchison's rating believing its outlook on the company is stable.

The ratings agency said it expects the proceeds of the sale to be used for payment of the company's debt and fund future businesses, as well as for distributing a cash dividend among HTIL shareholders.

"While HTIL's investment need to expand its operations in growing markets such as Indonesia and Vietnam will be high, the size of the cash inflow suggests that the quantum of the ensuing special dividend payout will likely be substantial," it said. 

Fitch said the significant improvement of the 3G telecommunications business is a prerequisite to any positive rating action going forward.   

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement