The company logo for Hutchison Telecommunications International Ltd, is displayed at Hutchison Telecom Tower in Tsing Yi, Hong Kong. The company said yesterday that parent Hutchison Whampoa is considering privatizing the unit through a buyout offer. Bloomberg News

Privatization of company's own telecom unit seen as value boost

HONG KONG: Hong Kong listed Hutchison Telecommunications International, an international telecommunications services provider, said yesterday that parent Hutchison Whampoa is considering privatizing the unit through a buyout offer.

"The board of directors has received an approach from the company's majority shareholder, Hutchison Whampoa Ltd, regarding a possible general offer to the company's shareholders and option holders," Hutchison Telecom said in a statement.

It added that an announcement on the subject could be released very soon.

Both the spokesmen for Hutchison Telecom and Hutchison Whampoa declined to comment on the possible offer, pending an official announcement.

Trading in the stock of Hutchison Telecom was suspended yesterday afternoon. The stock climbed HK$0.04, or 2.5 percent, to HK$1.65 before the trading suspension.

Speculation about a possible privatization attempt by the Hutchison Whampoa for its 60 percent-owned telecom unit has surfaced every now and then.

While financial terms and other details of the potential offer are not available yet, market watchers generally believe that the privatization attempt is intended to realize the value of Hutchison Telecom.

"Hutchison Telecom still has some assets (after spinning off and selling some key businesses). The parent firm may be attempting to realize the value of these assets," said Victor Yip, a telecom analyst at UOB Kay Hian (Hong Kong) Ltd.

Realization of value, a term commonly used by analysts and company managements, usually implies higher valuation for an asset or a company.

The share price of Hutchison Telecom has slumped since it spun off or sold its most profitable operations in recent years.

Hutchison Telecom sold its entire 51.3 percent stake in Partner Communications Company Ltd, a leading telecom operator in Israel, for about HK$10.7 billion in October 2009.

It spun off its Hong Kong and Macao operations for a separate listing under the name of Hutchison Telecommunications (Hong Kong) Ltd in the Hong Kong Stock Exchange in May last year. Before that, it had sold its operation in India.

After the disposals and spin-off, Hutchison Telecom has been left with operations in Thailand, Sri Lanka, Indonesia, and Vietnam.

Linus Yip, a strategist with First Shanghai Securities Ltd, also believes that the privatization attempt could be aiming at value realization.

However, he cautioned investors against being too optimistic about a successful deal.

"For companies that have big minority shareholding, the odds of a successful privatization attempt are relatively low," he said.

"It is very hard for minority shareholders and the major shareholder to agree on an offer price," he explained.

(HK Edition 01/05/2010 page6)