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Li Ka-shing in the Hunt for EU Telcos

Robert Clark
News Analysis
Robert Clark
10/30/2013
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Asia's richest man and Hutchison Whampoa boss Li Ka-shing is selling down his Hong Kong holdings and looks to be in the hunt for new acquisitions.

European business, and telecom assets in particular, rank high on his hit list.

In the past two years, Hutchison group companies have spent nearly $8 billion on European mobile companies and utilities. These include the €1.3 billion ($1.71 billion) acquisition of Orange Austria Telecommunication GmbH. in 2012 and the purchase of Telefónica SA (NYSE: TEF)'s O2 Ireland unit for up to €850 million in June this year. (See Three to Acquire O2 Ireland.)

Both of those deals have made Hutchison first or second in the market. Following a similar strategy, Li made an unsuccessful attempt to merge its loss-making 3 Italy business with Telecom Italia (TIM) in June.

Hutchison's 3 Group Europe also owns mobile operators in the UK, Sweden, and Denmark.

In Li's home market of Hong Kong, where 3 Hong Kong is the biggest mobile player, Hutchison and some of the other local conglomerates have made waves by announcing plans to sell off assets in response to the city's lower economic outlook.

Li has given up on his initial plan to sell off supermarket chain Park'n'Shop and is now weighing a spin-off of retailer A.S. Watson, which has 33,000 stores worldwide. A Watsons IPO could raise as much as HK$98 billion ($12.6 billion), Credit Suisse has estimated.

It's that prospective mountain of cash that has triggered speculation.

Financial Times columnist Lex notes that Hutchison's net debt to capital has fallen to about one-fifth, down from more than a third five years ago, and it has a stable A-minus credit rating. "That suggests that the cash raised from disposals is for other purposes."

Li and his telecom lieutenant, Canning Fok, have a reputation as traders who are willing to buy and sell assets if the price is right. They famously flipped then-UK mobile asset Orange in 1999 for £19.8 billion ($33 billion), re-entering the market via the 3G spectrum auction as a new player to set up 3 UK.

In his interim results statement in August, in an apparent reference to western Europe and the US, Li said "major economies were showing signs of stabilization and gradual recovery."

He said he expected 3 Group Europe operations would "increase market share and continue to operate efficiently."

— Robert Clark, contributing editor, special to Light Reading

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MordyK
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MordyK,
User Rank: Light Sabre
10/30/2013 | 8:28:03 PM
Buying Spree
I would buy underdevloped markets like Africa where the opportunity for growth is phenomenal and valuations are fairly still fairly low.

Also due to the lack of national infrastructure the governments look at the carriers as the solution to many issues beyond telecom services, which means there's a massive opportunity for growth
DOShea
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DOShea,
User Rank: Blogger
10/30/2013 | 8:52:41 PM
Who's for sale in Europe?
Or, to put it another way, who is worth buying and willing to listen to offers?
R Clark
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R Clark,
User Rank: Blogger
10/31/2013 | 9:01:12 PM
Re: Buying Spree
Sure, Africa is a better macro bet, but Hutchison plays just in Asia and Europe. Li and Fok are betting on under-valued Euro telcos ahead of a recovery but in each case they've tried to buy a competitor to get market size. They have a pretty good track record in deal-making, which is why they're getting a lot of attention now.
MordyK
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MordyK,
User Rank: Light Sabre
10/31/2013 | 9:17:16 PM
Re: Who's for sale in Europe?
If you wanna know his plans just ask the NSA :)
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