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Hutch Plots $1.5B IPO

Hong Kong’s Hutchison Whampoa Ltd. (Hong Kong: 0013) could raise up to $1.5 billion from an IPO of mobile and fixed-line assets in India, Hong Kong, Israel, and other markets before the end of the year, say financial news reports and a statement to the Securities and Exchange Commission (SEC).

The move comes just weeks after Singapore’s StarHub announced plans for its IPO and will be another test of investor appetite for Asian and emerging market telecom plays (see Carriers to Cash In on StarHub).

In a Form F1 filing made to the SEC on Friday, Hutchison detailed plans to sell up to $100 million of American Depositary Shares in its subsidiary Hutchison Telecommunications International Ltd. on the New York Stock Exchange, to run alongside a larger offer planned for Hong Kong.

Although the IPO is yet to be priced, a report on the FinanceAsia.com Website pegs the global offering as worth between $1.2 billion and $1.5 billion, assuming the business is valued at $5 billion and 30 percent of the stock is sold. The report notes, however, that a $5 billion valuation is considered “punchy.”

From Hutchison Whampoa’s perspective, now looks to be a good time to sell. Hutchison Telecommunications International has just turned profitable after years of heavy investment and is benefiting from strong growth in the Indian mobile market.

For example, the company turned a net loss of $68 million on revenue of $1.3 billion in 2003 into a profit of $69 million on revenue of $883 million in the first six months of 2004 (under U.S. GAAP). Minority stakes in six Indian mobile operations account for 46 percent of revenue, while mobile and fixed-line businesses in Hong Kong account for a further 25 percent, according to the SEC filing.

“The wireless business growth in India has widely beaten expectations," Edison Lee, head of telecom research at Credit Suisse First Boston Corp. in Hong Kong told the International Herald Tribune . "Still, investors may want to pay less because the company is overly diversified and lacking focus."

If speculation is to be believed, at least some of the proceeds from the sale will be re-invested in Hutchison Whampoa’s European 3G operations (“3 Group”), which recorded a net loss of $1.1 billion on revenues of $475 million in the first six months of 2004.

Hutchison’s stock inched up 1.6 percent in trading in Hong Kong today.

— Gabriel Brown, Chief Analyst, Unstrung Insider

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