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Billionaire Li Ka-shing’s Hutchison Whampoa Ltd. (13) would be a buyer rather than seller of European telecommunications assets as its 1.3 billion-euro ($1.6 billion) proposed takeover of an Austrian rival drew regulatory scrutiny.
“If there is ever a consolidation to be done, then we are the consolidator, not the consolidated,” Managing Director Canning Fok said in Vienna yesterday. “We’ll end up being the surviving leader. I’m not interested in anything less.”
As the biggest Asian investor in mobile-phone networks in Europe, Hong Kong-based Hutchison’s Three division operates in countries including Italy, the U.K. and Sweden. In Austria, the European Commission last month opened a full antitrust probe into Hutchison’s takeover of Orange Austria. Hutchison will seek a judicial review if the transaction is blocked and won’t commit to the plan for an unlimited time, Fok said.
A purchase of Orange Austria, owned by France Telecom SA (FTE) and Mid Europa Partners, would aid competition by making the third-biggest Austrian mobile-phone company stronger, according to Fok. Hutchison and Orange Austria together would have a 22 percent market share, behind Telekom Austria AG (TKA) and Deutsche Telekom AG (DTE)’s T-Mobile unit.
“The longer the process takes, the weaker the business case will be,” Fok told reporters yesterday.
As part of the February transaction, Hutchison agreed to sell Orange Austria assets including mobile carrier Yesss! to Vienna-based Telekom Austria for 390 million euros. Now, Hutchison has further offered access to its Austrian network to an unidentified company to provide services as a so-called mobile virtual network operator. Other interested parties may also ask to take part in the arrangement, which would aid competition, Fok said.
The Orange Austria takeover would fall through if the Yesss! sale were to fail as each transaction is “conditional” on the other’s completion, said Jan Trionow, chief executive officer of Hutchison Austria. Orange Austria would have too much debt without proceeds from the disposal, Fok said.
Even if the Orange Austria acquisition fails, Hutchison won’t sell its Austrian business, Fok said.
As Europe’s sovereign-debt crisis reduced consumer spending on phone services, falling valuation of the region’s phone companies has attracted investors outside the region including Li and Carlos Slim, the world’s richest man. Slim’s America Movil (AMXL) SAB last month acquired stakes in Telekom Austria and Dutch operator Royal KPN NV. (KPN)
Hutchison in May made a 2 billion-euro bid for Eircom Group, the Irish phone company in supervised credit protection The offer was rejected partly because it would have doubled the losses suffered by the operator’s most-senior lenders. Hutchison has since moved on and agreed this month with Vodafone Group Plc (VOD) to combine their mobile-phone networks in the country.
The economic crisis in Europe “is very good for us, as a newcomer,” Fok said, as customers looking to conserve cash are more likely to flock to the lower-cost offering and one-month contracts of Hutchison’s Three unit.
“In good times, people don’t see the value that we’re offering as that relevant,” Fok said. “But in times like this, it’s very good for us. We have growth.”
In Italy, Hutchison held discussions last year over a sale its Three unit to Telecom Italia SpA (TIT), but the talks didn’t result in a deal, people with knowledge of the matter have said.
“I can last for a thousand years” in Italy, where Hutchison has the country’s lowest-cost mobile-phone network, Fok said. Three had 9.2 million customers in Italy as of March 28, the most of any European country Hutchison operates in.
To broaden Three’s smartphone portfolio, Fok said the company is interested in offering Nokia Oyj (NOK1V)’s new phones using Microsoft Corp. (MSFT)’s Windows 8 software. He would be “surprised” if talks with the Finnish handset maker weren’t already underway, he said.
Three reported 28.9 million customers in Europe as of March 28. Hutchison, which invests in ports, retail, utilities, property as well as phone networks, is scheduled to report first-half earnings on Aug. 2.
Hutchison’s shares rose as much as 1.6 percent to HK$69.70 and were up 1.3 percent as of 2:11 p.m. in Hong Kong. The stock had gained 5.5 percent this year through July 27.
A group of Li-controlled companies last week agreed to agreed to pay 645 million pounds ($1 billion) in cash for Wales & West Utilities Ltd. to almost double the size of the gas transmission businesses his companies control in the U.K.
Fok yesterday confirmed the Hong Kong conglomerate’s interest in acquiring a stake in Manchester Airports Group, owner of Britain’s busiest airport outside of London.
The company aims to increase European investments this year as it benefits from growth in telecommunications, skin care, container terminals and the region’s “quite recession-proof” utilities industry, he said.
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