Hutch Tele to book HK$70bn post stake sale

The Hong Kong-based Hutchison Telecommunications International (HTIL) would record a profit of around HK$70 billion, once the sale of 67 per cent stake in Hutch-Essar is completed.

The sale is likely to take place at over 10 times than that of its price-to-book (P/B) ratio of HK$9.5 billion as on 2005 end, according to a study by Chinese investment bank BOC International Research (BOCI).

This would be at a per-share price of around HK$15, with an indicated enterprise value (EV) of $19 billion. It will also clear HTIL's debts and put the company in a net cash position of around HK$60 billion or HK$14 per share.

The research agency, quoting newspaper reports said, the indicated EV of Hutch-Essar stood at $19 billion. This represents about 77 per cent of the Hong Kong-based company's total EV, based on the net debt of HK$33 billion as by the end of June 2006.

At least three parties are said to be interested in the Indian GSM operator. British telecom major Vodafone and Reliance Communications, along with a host of private equity funds are in the race, while Hutch-Essar's Indian partner Essar Group is also weighing its options.

Essar Group has a first right of refusal (FROR) regarding any Indian bids for Hutchison's stake in the joint venture. At the same time, Indian law prevents a foreign investor from holding more than 74 per cent of telecom licensees.

On special dividends, the research agency said, "whether there will be a generous special dividend remains to be seen, as the company (HTIL) will be facing start-up losses in Indonesia and Vietnam over the next few years," it said.

BOCI, which is a subsidiary of Bank of China, has also reiterated its 'underperform' rating on HTIL.

One US dollar is equal to 7.8 Hong Kong dollars.