Bloomberg News

Vodafone Said to Talk to Hutchison Over Irish Network Merger

July 04, 2012

Hutchison Whampoa Chairman Li Ka-shing

Li Ka-shing, chairman of Hutchison Whampoa Ltd. and Cheung Kong (Holdings) Ltd. Photographer: Jerome Favre/Bloomberg

Vodafone Group Plc (VOD) and Hutchison Whampoa Ltd. (13) are in talks to combine their phone networks in Ireland, two people with knowledge of the matter said.

While no deal has been signed, the operators are close to an agreement to pool their infrastructure in a joint venture, the people said, declining to be identified because the discussions aren’t public. The phone companies plan to keep their separate brands and frequencies in Ireland, the people said. Hutchison Whampoa, controlled by Hong Kong billionaire Li Ka-shing, owns the Three Ireland operator.

A deal would follow a similar agreement between Vodafone, the world’s second-biggest mobile-phone operator, and Telefonica (TEF) SA’s O2 unit in the U.K., announced last month, as operators seek ways to lower costs before deploying new high-speed networks. In Ireland, former monopoly Eircom Group and O2 signed a mobile network sharing partnership last year. Hutchison this year unsuccessfully submitted two separate bids to buy Eircom.

“It’s a smart move to initiate savings while having a high probability of receiving the green light from regulators,” said Vincent Maulay, an analyst at Oddo & Cie. in Paris. Vodafone’s Irish unit may be able to cut operating costs by 10 percent through the infrastructure merger, he said.

Hans Leung, a spokesman at Hutchison in Hong Kong, declined to comment.

Hutchison Whampoa rose 3.9 percent to HK$70.60 in Hong Kong. Vodafone added 0.8 percent to 181.05 pence on the London exchange as of 9:23 a.m.

Competing Offerings

With more mobile phones than people in Europe, the region’s operators are increasingly relying on sharing and combining networks to lower costs and offer faster data downloads after regulators blocked some merger and takeover attempts such as a combination of Vodafone’s Greek assets with a competitor.

In the U.K., Newbury, England-based Vodafone and Telefonica are setting up a 50-50 venture with the companies operating and managing a single network grid while running two competing nationwide mobile Internet and voice networks.

The average European operator will spend about 2 billion euros ($2.5 billion) to upgrade an existing network to fourth- generation network technology to cover 75 percent of a country with 50 million people, according to researcher Idate.

France Telecom SA (FTE) merged its Orange network in the U.K. with Deutsche Telekom AG (DTE)’s T-Mobile in 2010, creating Everything Everywhere in a bid to save more than a total of 4 billion euros in network, marketing and administrative costs by 2014. That deal, cutting the number of network operators in the country from five to four, paved the way for joint procurement projects and network sharing across all their markets.

Austrian Merger

Telefonica has similar network asset sharing arrangements in various markets including with T-Mobile in the Czech Republic and Vodafone in Spain.

Hutchison has investments in industries including ports, infrastructure, telecommunications, energy, property and retail in more than 50 countries, according to its website. The company generated 55 percent of its revenue of HK$233.7 billion ($30 billion) last year from Europe, according to data compiled by Bloomberg.

Hutchison agreed to acquire Orange Austria in February in a deal valued at 1.3 billion euros. Hutchison plans to merge its Austrian Three unit with Orange, making it the country’s third- biggest mobile provider after Telekom Austria AG and Deutsche Telekom’s T-Mobile Austria. On June 29, the European Commission opened a full antitrust probe of the deal.

Li, Hong Kong’s richest man, has a wealth of $23.3 billion, ranking him 15th on the Bloomberg Billionaires Index of the world’s richest individuals.

To contact the reporters on this story: Jonathan Browning in London at jbrowning9@bloomberg.net; Joe Brennan in Dublin at jbrennan29@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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