Hutchison Whampoa Up Despite 3G Sale Denial

HONG KONG -(Dow Jones)- Shares of Hutchison Whampoa rose sharply Wednesday, despite the company denying a newspaper report that said the conglomerate may sell its third-generation mobile operations in Europe.

Traders said investors would welcome a sale, because disposal of the company's 3G operations would remove uncertainty. But even without such a sale, Hutchison Whampoa's shares are already trading at a level which assumes its 3G operations carry no value.

Steven Leung, director of institutional sales at UOB Kay Hian (HK) Ltd. said this is "an unreasonable assumption," but suggests Hutchison has very little downside, which could explain Wednesday's big rise.

"Given the market's liquidity now, investors are likely to chase laggards with limited downside," said Leung.

Hutchison Whampoa shares ended 3.8% up at HK$74.40 off an intraday high of HK$74.50, outperforming a 1.3% gain in the benchmark Hang Seng Index.

Its shares have sharply underperformed the broader market this year, as investors shunned the stock on the uncertain outlook of its 3G businesses. Hutchison Whampoa has risen just 0.75% so far this year, compared with a 29.4% gain in the benchmark index.

The Chinese-language Ming Pao Daily cited a person familiar with the situation as saying the Hong Kong conglomerate is in talks to cooperate with France Telecom SA's (FTE) unit Orange, with one possibility being the complete sale of Hutchison's European 3G operations to the company.

"We definitely have no plan to sell our 3G operations," said Hutchison Whampoa spokeswoman Laura Cheung.

Cheung also denied another part of the Chinese-language newspaper's report that said one option being discussed is the potential consolidation of mobile operations between the two parties.

In a research note Wednesday, Goldman Sachs said Hutchison Whampoa is likely to opt for the "long march" option by trying to steer its 3 UK business to profitability over the long term, without resorting to merger and acquisition activity.

That could be seen from the company's purchase of 3G retail outlets in the U.K. and the transfer of senior management to 3 UK from 3 Australia, Goldman Sachs said.

The company is also less likely to opt for the "quick fix" of selling off its 3G operations, it said.

Last week, Hutchison Whampoa Managing Director Canning Fok said the "chance has gone" for the company to spin off its 3G mobile businesses.

He also denied market speculation that Hutchison Whampoa may sell its 3 UK unit to Vodafone Group PLC, after the chief executive of Vodafone expressed interest in buying some 3 UK assets.

Hutchison has 3G operations in countries including Italy, Norway, Denmark, the UK, and Ireland.

Hutchison Whampoa's planned listing of its Italian 3G unit, 3 Italia, on the Milan stock exchange in February was derailed because of a valuation that was less than Hutchison had hoped for.

-By Joyce Li, Dow Jones Newswires; 852-2802-7002; joyce.li@dowjones.com

-Edited by Theresa Davidovitz

(END) Dow Jones Newswires"

Posted to the site on 22nd November 2006