Hutchison’s UK unit hits profit milestone

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Hutchison Whampoa reported narrower losses for its global 3G business on Thursday, citing improved operating numbers at its core UK and Italy units as evidence that prospects were looking up.

Losses before interest and tax narrowed to $3.45bn, a 30 per cent improvement on the year before. The group was helped by a HK$9.4bn gain from the re-purchase of minority shareholders’ 35 per cent stake in 3 UK at what Hutchison termed “a substantial discount” to its real value.

Hutchison chairman Li Ka-shing said the company’s 3G subscriber base had increased 65.5 per cent to 11.06m by the end of last year, and stood at 11.91m.

According to Mr Li this growth, combined with a fall in network construction costs and an increase in higher spending post-paid subscribers in the UK and Italy, meant that the Hong Kong-based conglomerate was under no pressure to float its 3 Italia operation. The company has invested more than €20bn ($24bn) in 3G worldwide.

“The [Italian] business is doing so well that I may not be willing to sell any more,” Mr Li said.

Hutchison scrapped its planned listing of 3 Italia in February, after the market demanded a €7bn valuation for the business. The company subsequently sold a 10 per cent stake to a group of private investors, in a transaction that valued the Italian operation at €9bn.

“They thought we would [settle for a lower valuation] because they thought we needed to do [the IPO],” Canning Fok, Hutchison’s managing director, said. “We weren’t born yesterday.”

As in previous years, Hutchison’s 3G losses were offset by one-off dis-posals and strong performances from its ports, retail and oil businesses. These included a HK$7.4bn gain from the sale of a 19.3 per cent stake in Hutchison Telecommunications International to Egypt’s Orascom Telcom.

Overall, the conglomerate’s 2005 net profit grew 11 per cent to HK$14.3bn.

“It seems to be in line,” said one analyst. “The 3G losses were a little higher than expected but the operating trend seems to be going reasonably well.”

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