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[Data_Rox]

Investors punish Hutchison over 3G woes The stock dips on fears the firm may have to inject more cash

South China Morning Post (Hong Kong)
March 11, 2003

Ben Kwok

Hutchison Whampoa shares yesterday suffered their biggest one-day fall this year on heightened concerns over the company's third-generation (3G) business plan.

The conglomerate's shares fell 3.81 per cent to a five-month low of HK$ 42.90 as investors worried that Hutchison might have to inject more capital into its other 3G start-ups after a GBP1 billion (about HK$ 12.43 billion) cash call from its British venture.

Yesterday, Deutsche Telekom, in which Hutchison owns a minority stake, reported a record loss of 24.6 billion euros (about HK$ 211.58 billion) for last year, mainly caused by a write-down on its 3G assets.

This added to the pressure on Hutchison, the only European 3G operator that has chosen not to mark down any of its investments in the next-generation mobile-phone business.

"Hutchison is the only guy with a real 3G commitment," Daiwa SB Investment chief investment officer Ambrose Chang said.

Mr Chang said concerns Hutchison might need to provide additional financing for its other 3G operations had caused analysts to knock between HK$ 3 and HK$ 7 per share off its target price.

Last weekend, Hutchison confirmed it would inject GBP650 million into its 65 per cent-owned subsidiary H3G UK, which stages its commercial launch tomorrow.

The additional funding had been already stated in its business plan, Hutchison said.

Japan's NTT DoCoMo, which owns 20 per cent of H3G UK, will also participate in the new funding, while the other shareholder Dutch KPN Mobile may not.

Analysts said the British cash call highlighted a vote of no-confidence from bankers, who wanted to tighten H3G UK's loan covenant by requesting more shareholder funding.

"We believe Hutchison's significant GBP650 million commitment will likely exacerbate market concerns about its 3G exposure and could give rise to near -term weakness in the stock," Goldman Sachs analyst Mike Warren wrote in a research note.

The brokerage said Hutchison's latest commitment to H3G UK should be viewed as a partial step towards a worst-case scenario of about GBP1.6 billion.

One European brokerage analyst said: "I am confused about whether 3G is something that Hutchison knows but everyone else doesn't, or that there is something only Hutchison doesn't know."