Hutchison Whampoa eyes KPN's 3 stake. (Wireless News Review).
The UK 3G venture is valued at approximately 2bn pounds ($3.33bn), and KPN's stake is thought to be worth less than 300m pounds ($500.6m).
The possible acquisition is despite Stand & Poor's downgrading of Hutchison Whampoa's credit rating, citing uncertainty over its investment in Hutchison 3G, which is better known as "3". The downgrade from A to A- reflects concern over Hutchison Whampoa increasing its exposure in the UK joint venture, and worries over longer than expected return on investment.
Hutchison Whampoa reacted with disappointment to the news of the downgrade, and said in a statement "We are confident that our 3G businesses will provide strong growth prospects for the Group and that our resources are more than adequate to cover all HWL's refinancing requirements as well as the needs of our 3G businesses and of all other businesses going forward."
In early March, Hutchison 3G had sought 1bn pounds ($1.57bn) from its three parents in order to extend banking loans. Hutchison Whampoa, which has a 65% stake, provided 650m pounds ($1.08bn). while NTT DoCoMo, which holds 20%, provided 200m pounds ($333.4m).
KPN however refused to provide its 150m pound ($250.1m) share, which resulted in Hutchison Whampoa last week filing a lawsuit in London to force KPN to provide the funding, as well as suing for damages.
The meltdown in the relationship between the two shareholders in the UK joint venture, has prompted speculation that Hutchison Whampoa will now step in and acquire KPN's stake, despite market and analyst concerns.
In Europe, Hutchison launched its 3G service in Italy and the UK. In the UK, it is clear Hutchison 3G has been struggling since its March 3G launch. Sales so far have been sluggish, with only 25,000 subscribers, and it looks increasingly unlikely that "3" will reach its one million target by the end of the year.
"3" also only started selling 3G handsets nationwide last week, despite the service being launched at the start of March. Its network has 60% coverage, with users reverting to 2G networks when not in the 3G zone. This "handover" from 2G to 3G networks, and back again, has caused numerous technical problems.
Faced with the slow uptake, "3" slashed the costs of its tariffs and its handsets, and is now promoting its ability to make cheaper 2G voice calls than its rivals, rather than its fancy multimedia 3G capabilities. This move into 2G has taken into direct competition with the four established mobile operators in the UK, where subscriber penetration is thought to be reaching saturation point.
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|Date:||Jun 26, 2003|
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