[3GScottishUser]

From Yahoo News/Dow Jones (17/05/2005):

Hutchison Li Eyes Spin Off Of Italy, UK 3G Ops

HONG KONG (Dow Jones)--Hutchison Whampoa Ltd. (0013.HK), the ports-to-telecom giant, is planning to spin off and list its U.K. 3G operations by mid-2006 and its Italian 3G businesses before this year is out.

Hutchison, owned by one of the richest men in Asia Li Ka-shing, is known for using one-off gains from spin-offs and trade sales to boost its earnings.

For instance, it reported a 38.1% net rise in its 2004 net profit to HK$16.13 billion despite losses from 3G operations, because of HK$24.48 billion in exceptional gains.

Li told reporters of the timeframe for the two spin-offs after the company's annual general meeting Thursday.

Analysts are still weighing the impact of the Italian spin-off on Hutchison's earnings this year.

"There are too many variables concerned," said Daiwa Institute of Research analyst Jonas Kan.

"We have to see more concrete developments, such as a listing application to the stock exchange, before we take the exceptional gains (from the listing) into account," Kan added.

However, what's certain is that Hutchison's first half earnings will be boosted by a non-cash exceptional gain of HK$9.4 billion from buying back stakes in its UK 3G unit from KPN Mobile N.V. (KPM.YY) and NTT DoCoMo Inc. (DCM).

In a research note, Citigroup Smith Barney analyst Anil Daswani said he has adjusted the 2005 earnings estimates for Hutchison by a net HK$5 billion, lower than the HK$9.4 billion exceptional gain, adding that Hutchison will have to bear 100% of losses from its operations starting from the second half of 2005.

Hutchison, which analysts say has invested EUR18.2 billion in the 3G venture, started operations in the U.K. and Italy in March 2003, making it the first company to offer such services in Europe. It has since launched 3G in Hong Kong, Australia, Austria, Ireland, Denmark, Sweden and most recently in Israel, on Dec. 1.

Li said Thursday Hutchison would be interested in pursuing a 3G business in Poland though it has lost out in an auction for the 3G Universal Mobile Telecommunication System (UMTS) spectrum in Poland.

The winner of the bid, a subsidiary of Poland's second largest fixed-line operator Netia Holdings (NET.WA), had indicated that it may return the 3G license to the government.

In late March, Li said the company had 8.08 million 3G subscribers, up from the 5.9 million it said it had in mid-December. Of the 8.08 million, 3.02 million were in the U.K. and 3.56 million in Italy.

In March, the group said its 3G operations had a net loss of HK$25.32 billion. The loss before interest and taxes on Hutchison's 3 Group - the brand under which its 3G businesses operate - last year widened to HK$37.50 billion, from HK$11.88 billion in 2003.

However, Li Thursday reiterated earlier targets that would see the company's 3G operations break even on an earnings before interest, tax, depreciation and amortization basis by the end of this year. He also said he expected the 3G businesses to break even on an earnings before interest and tax level next year.

In 2004, Hutchison's earnings were helped by gains from the disposal of its stake in a joint venture with Procter & Gamble Co. (PG) in China, the company's placing of shares in fixed-line unit Hutchison Global Communications in early 2004, as well as its listing in October of Hutchison Telecommunications International Ltd. (2332.HK).

In 2003, its one-off gains from disposals totaled HK$1.08 billion.

http://sg.biz.yahoo.com/050519/15/3sm5f.html

[3GScottishUser]

Following the above Dow Jones reports (20/05/2005):

1548 [Dow Jones] Hutchison Whampoa (0013.HK) confident of successfully floating Italy 3G business in 2H05; "but we all find it very difficult to envisage", says analyst. Timing of IPO implies marketing the spinoff while yet to break-even at EBITDA level; but in Hutchison has done this before, with Orange's IPO in 1996; Orange only went EBITDA positive in 1997, says analyst. But Hutchison will have to divulge more on 3G during float; analysts still puzzled over low customer acquisition costs.

[Jon3G]

more info on the float

http://www.mobiletoday.co.uk/artman-test/publish/article_411.shtml

[3GScottishUser]

Its a no brainer. Nobody in their right mind would touch that stock.

Here's a piece i wrote the other day on this topic.

"My point is that it's going to take a considerable period of time and a very substantial change in 3 UK's fortunes before the financial markets forget the above. The prospects are going to have to be a great deal better than they were 12/18 months ago before any offering could be considered.

Examine some recent 3 UK 'press reports'.

Industry leading churn of 60%+ , Massive dealer subsidy/support to drive aquisition at unrealistic headline rates (which will produce even more churn in the short term). The same poor customer service/experience, uninspiring handsets and restricted connectivity. Add to this the fact that pre-pay accounts for 65% of the UK mobile market and 3 have had no significant growth in that sector since January 2005 due to the inflexibility of their pre-pay product and new compeditor activity which makes break-even an unrealistic prospect.

I doubt if 3's prospects are that great. Arun Sarin seems to think 3 in Italy and the UK have a future but he would say that as his company continues to expand and make fortunes (he can afford to be generous). The reality is somewhat different as 3UK are now cornered into offering cheap contract deals. Even this sector of the market is looking less fertile with much more fashionable products appearing at similar deals to what 3 were offering. What's left to do? Current deals are even cheaper, making a return on investment even less likely, meanwhile the big players are slowly but surely refining their products and deliviering innovation. New handsets like the SE k600i will be the key to substantial migration efforts from Q3 for the majors. (By the way what happened to all the problems the big 4 would have? They have not been perfect for sure but on the other hand they have not had the tidal wave of consumer complaints that 3 UK suffered and still seem to).

3 had a window of opportunity with a new product that had some unique benefits. What happened? Did they launch too early? Choose the wrong applications? Expect that price alone would win over consumers regardless of product/service quality? I suspect we will have these and other questions answered sooner rather than later."