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Li's telco eyes separate listing

By Mark Lee | March 5, 2009, Thursday | Print Edition

HUTCHISON Telecommunications International Ltd said it will seek a separate listing for its mobile-phone and fixed-line operations in Hong Kong and Macau in an effort to ''unlock shareholder value.''

The phone carrier, controlled by billionaire Li Ka-shing, aims to complete the spinoff by transferring shares in the Hong Kong and Macau assets as a dividend to investors by early May, Chief Executive Officer Dennis Lui told reporters yesterday. The proposed transaction won't raise new capital, he said.

The plan will help lift shares in Hutchison Telecom even as the emerging-markets phone carrier is expected to post lower profit this year, analysts said this week. Earnings from Israel, the company's biggest market, may decline as the economy slows, according to Morgan Stanley.

Hutchison Telecom, 60 percent owned by Li's Hutchison Whampoa Ltd, considers its own stock ''undervalued,'' Lui said. The proposed spinoff will separate the company's operations in faster-growing markets from ''yield-plays'' such as the Hong Kong and Macau operations, he said.

''We believe a separate listing of the Hong Kong business may be a precursor to further restructuring at HTIL, including possible sale of stakes in other businesses,'' Morgan Stanley analyst Sachin Salgaonkar wrote in report on Tuesday. He raised his investment rating on Hutchison Telecom to ''overweight'' from ''equal-weight'' after the company first disclosed it was considering the spinoff.

Hutchison Telecom, with operations in seven markets in Asia and the Middle East, yesterday reported full-year profit fell 97 percent to HK$1.88 billion (US$242 million), from HK$66.9 billion a year earlier. This compared with the HK$2.1 billion median estimate of three analysts in a Bloomberg News survey. The telco's 2007 profit included a one-time gain of HK$69.3 billion from the sale of a controlling stake in India's Vodafone Essar Ltd.

Sales from mobile-phone operations in Hong Kong and Macau rose 13 percent to HK$5.38 billion last year, accounting for 22.7 percent of revenue. The company's fixed-line operations in Hong Kong boosted sales 11 percent to HK$2.69 billion.

The assets in Hong Kong and Macau are worth HK$11 billion, or HK$2.2 a share, Deutsche Bank analyst William Bratton wrote in a report on Monday. The proposed separation will ''crystallize the value of the remaining assets,'' according to Bratton, who recommends investors ''buy'' the stock.

Hutchison Telecom rose 1 percent to close at HK$2.12 in Hong Kong before the announcement. The stock rose 11 percent on March 2, when the telco said it was considering the spinoff.

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