Hutchison Telecom Holders OK Hutchison Essar Sale Plan

HONG KONG -(Dow Jones)- Hutchison Telecommunications International said Friday shareholders approved its plan to sell its 67% stake in Indian mobile-phone operator Hutchison Essar to Vodafone Group for US$11.08 billion in cash.

The result was expected by the market because Hutchison Telecom's controlling shareholder, conglomerate Hutchison Whampoa, could also vote, analysts said.

Hutchison Telecom, which is 49%-owned by Hutchison Whampoa, signed a deal in February to sell the stake in the Indian company to Vodafone.

"We received overwhelming support from shareholders for the transaction," Hutchison Telecom Chief Financial Officer Tim Pennington told reporters in Hong Kong.

Some of Hutchison Telecom's minority shareholders who voted in favor of the plan were attracted by the special dividend of HK$6.75 a share to be paid on the deal's completion.

"I find the special dividend very attractive, that's why I voted for the plan," said one minority shareholder, who asked not to be identified.

Hutchison Telecom said earlier it expects to book an estimated pretax gain of US$9.6 billion on the deal's completion.

The Hong Kong-listed company said it would use HK$40 billion from the proceeds of the sale to invest in new and existing businesses and for general working capital, and HK$13.9 billion to pay down debt.

India is one of the world's fastest-growing telecom markets, and Hutchison Telecom's operations there were considered the company's prized asset, amounting to about 80% of its enterprise value.

On the sale of that asset, Hutchison Telecom will be left with scattered telecom holdings in markets including Israel, Indonesia, Thailand and Vietnam, and a massive pile of cash.

Hutchison Telecom Chief Executive Francis Lui said in late February that the company will also seek new investment opportunities in emerging markets.

In a statement Thursday, Hutchison Telecom said an Indian non-governmental body, Telecom Watchdog, had filed a petition alleging the sale of its stake in Hutchison Essar would be in breach of India's regulation on foreign shareholding of the mobile company.

Mickey Shiu, spokeswoman for Hutchison Telecom, said: "I can firmly tell you that (the petition) will have no impact on the completion of the transaction."

She said the deal is expected to be completed after April 2.

Telecom Watchdog's petition is seeking to cancel the telecom license of Hutchison Essar. A lawyer for Telecom Watchdog said it isn't seeking to block the sale of shares to Vodafone, but alleged Hutchison Telecom and Vodafone are violating laws governing foreign ownership of telecommunications companies and should be penalized, and the structure of the joint venture should be altered so that it complies with regulations.

Indian law restricts foreign ownership in telecommunications ventures to 74%. The current structure of Hutchison Essar includes a 22% stake in the venture held by Essar Group through an offshore company, which the petition claims brings the foreign ownership in the venture above the 74% threshold. The current shareholding structure has received approval from Indian authorities.

-By Aries Poon, Dow Jones Newswires; 852-2832-2332; aries.poon@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 9th March 2007