Asia Shows Off Its Muscle In Europe

Cash-rich Li's Hutchison has a market capitalisation of over $54 billion, says Barun Roy

The world has long known and feared Asia's muscle in manufactured products, particularly from Japan, Korea, and Taiwan. Late last month, at a fiercely contested international auction in London, it got a feel of the region's growing mettle in services as well. The market watched in awe as a Hong Kong conglomerate, Hutchison Whampoa, bid 4.38 billion Pound and took away the plum of a licence to provide third-generation mobile phone services in the UK. It was Hutchison's biggest overseas investment and the group immediately announced it would spend another 5 billion Pound to develop the new technology. That was New Asia talking.

 

The technology that Hutchison and its 9.9 per cent Canadian partner Telesystem International Wireless, will provide will allow mobile subscribers to access the Internet, send e-mail, handle vast amounts of data, and exchange images through their mobile phones. And the UK investment is only the beginning of a major European thrust. Other countries have similar technological ambitions and Hutchison is immensely cash-rich to pursue those opportunities. Its guarantee will satisfy any banker any day.

Staying cash-rich has been a fundamental business tactic of Hutchison's crafty owner, the legendary Li Ka-Shing, who was the world's tenth richest business tycoon on the Forbes tally last year, with a personal net worth of $12.7 billion. He exits investments with as much care as when he makes them, and always ends up with hefty windfalls.

Ever since his plastic flower manufacturing days in the early 1940s, Li's moves have often surprised his competitors but have always kept his group profitable. Look at telecommunications. Hutchison entered the UK mobile phone market in 1989. In 1994, it launched the Orange brand, developed it to seize an increasing share of that market, and later took the brand to countries like France, Germany, Belgium, and Switzerland. But in November 1999, it sold its 49.01 per cent share in Orange Plc to Mannesmann AG of Germany for almost $15.3 billion, and Hutchison's 1999 net profit zoomed to nearly $15.2 billion from $1.1 billion in 1998.

But that's not the end of the story. Hutchison is Mannesmann's single largest shareholder (10.1 per cent). When UK-based Vodafone AirTouch, the world's largest mobile telecom company, later took over the Orange stake from Mannesmann, Hutchison ended up having 5 per cent of Vodafone. Earlier this year, Li sold 1.5 per cent of it for $4.6 billion.

But there are certain things Li will never forsake, like his roots in the service industry. There are five core elements of his business and all of them are organised to provide a service of some kind or another.

People need shelter; so he is in property, people need to trade; so he is in ports, people need to communicate; so he is in telecommunications, people need to shop; so he is in retailing and people need electricity to run their activities; so he is in energy.

And since 97 per cent of his turnover is generated outside Hong Kong, he has got to target the world. Li owns an oil company in Canada. In 1991, he acquired Felixtowe, UK's busiest port, and went on to gain effective control of Europe Combined Terminals, a 16-berth facility in Rotterdam, which is the largest container port in Europe and fifth largest in the world.

In 1996, he secured the rights to operate the Panama Canal ports of Christobal and Balboa. And right now his group is engaged in developing a deepwater trans shipment container port at Freeport, Grand Bahama, at the crossroads of trade between Europe and the Americas.

For a group that has the world as its oyster, there must be much more in store and when its flagship company, Hutchison, alone has a market capitalisation of over $54 billion at this point in time, one can expect many more dramatic displays of muscle