HONG KONG: Hutchison Telecom, which agreed this month to sell its Indian mobile unit to Vodafone Group Plc for $11.1 billion (Rs49,105 crores), plans to pay a special dividend amounting to US$4.1 billion following the deal.
The company, which will earn a pre-tax profit of US$9.6 billion on the sale of its 67 percent stake in number four Indian cellular carrier Hutchison Essar, its most valuable asset, said it will earmark US$5 billion to invest in businesses old and new, including its startup operations in Indonesia and Vietnam.
The dividend amounts to HK$6.75 per share, or US$12.96 for each of the company’s American depositary shares. Ports-to-telecoms conglomerate Hutchison Whampoa Ltd., which owns nearly half of Hutchison Telecom, will receive nearly half the special dividend payout.
UK giant Vodafone topped rival bidders for fast-growing Hutchison Essar earlier this month in a deal that analysts have said is expensive, an opinion shared by Hutchison Telecom.
“Our view is that prices for telecom businesses are expensive at this time, and there will be a cooling-off in the next 12 to 24 months,” Dennis Lui, chief executive of Hutchison Telecommunications International Ltd., told a media briefing on Thursday.
“With that in mind, HTIL will be uniquely positioned to reap the benefits of such a change with one of the region’s strongest balance sheets,” Lui added.
Speculation over the future of the firm after it unloaded its key asset has been rife, with some watchers predicting the sale of parts of the business to Egypt’s Orascom Telecom, which owns 19 percent of Hutchison Telecom.
“I think Hutchison Whampoa will be the one who is laughing the loudest, because they will receive a special dividend which will lower their gearing,” said Louis Wong, research director at Phillip Securities.
“As for HTIL, there is a lot of uncertainty clouding its outlook,” Wong added.
Hutchison Telecom, which also operates networks in Ghana, Hong Kong, Israel, Macau, Sri Lanka, and Thailand, said on Thursday that its strategy remains unchanged.
“We will seek opportunities in emerging telecom markets that we believe can create long-term value for our shareholders,” Lui said.
Hutchison Telecom said it would maintain its listing status -- contrary to speculation it might be taken private -- and said it had no plans buy third-generation (3G) telecoms businesses from Hutchison Whampoa.
Investors have been clamouring for a special dividend, and sold down the shares by as much as 17 % soon after the deal in the absence of a clear dividend plan and disappointment that the sale price was not higher.
The shares have since risen and ended Thursday up 2.6 % at HK$17.64, still 8 % below their pre-deal price.
Hutchison Telecom, which will apply up to US$1.8 billion in deal proceeds to reduce its indebtedness, said it plans to establish a dividend policy, which it will announce in August.
The firm’s remaining businesses generated proforma earnings before interest, tax, depreciation and amortisation (EBITDA) of about US$650 million in 2006, the company said, driven by its operations in Hong Kong and controlling stake in Israel’s Partner Communications Co. Ltd.
Hutchison Telecom plans to post full year results on 20 March.