Hutchison Whampoa Ltd. (13), billionaire Li Ka-shing’s biggest company, is nearing a deal to acquire Orange Austria, the mobile-phone operator owned by France Telecom SA (FTE) and buyout firm Mid-Europa Partners, according to people with knowledge of the matter.
A transaction that may value Orange Austria at about 1.4 billion euros ($1.8 billion), including debt, may be finalized within weeks, the people said, declining to be identified as the talks are private. France Telecom may receive about 100 million euros in cash from the sale of its 35 percent stake, one of the people said.
European mobile operators are looking to consolidate, some concentrating on fewer markets, as subscriber growth stagnates in their home countries and network expenses rise because of data-hungry devices such as Apple Inc. (AAPL)’s iPhone. Hong Kong-based Hutchison’s 3 Group sells services in European countries including Austria, Italy, the U.K. and Sweden as well as Australia.
“Looking across Hutchison’s European footprint, they are not going to have too many opportunities like this in Austria,” said Nick Brown, an analyst at Espirito Santo Investment Bank in London. “It’s always been subscale in Europe, and this is a way for them to gain scale in one of its markets.”
Hutchison rose as much as 1.9 percent to HK$68.55, the highest intraday level since Dec. 5, before trading at HK$68.30 as of 10:53 a.m. in Hong Kong. The benchmark Hang Seng Index gained as much as 1.8 percent.
France Telecom advanced 0.6 percent in Paris trading yesterday.
A deal would combine the third- and fourth-largest Austrian operators, improving the enlarged company’s ability to compete in the country of 8.2 million people. The operator may gain almost 30 percent market share after divesting the Yesss! brand to Telekom Austria AG (TKA), Espirito Santo’s Brown said. Hutchison is the fourth-largest operator in both Italy and Britain.
Representatives of France Telecom and Hutchison declined to comment, as did an official at Mid-Europa, which owns 65 percent of Orange Austria.
“Given the economic environment, you’d expect certain assets in Europe will be more attractive in terms of pricing compared to six to 12 months ago,” said Adrian Lowe, an analyst at Mirae Asset Securities in Hong Kong. “It’s typical of Hutchison to consider buying when markets are considered cheap. They have a lot of cash.”
Hutchison, with investments in industries including ports, energy, retail and telecommunications in more than 50 countries, had HK$83 billion ($10.7 billion) of cash and near cash assets at the end of June, according to data compiled by Bloomberg.
3 Group, Hutchison’s unit with mobile-phone operations in the U.K., Italy, Ireland, Austria, Denmark, Sweden and Australia, posted its first profit before interest and tax in 2010, seven years after starting services. The Hong Kong parent incurred combined losses of more than $20 billion at 3 Group between 2003 and 2009 while battling to win users against European carriers, including Vodafone Group Plc (VOD) and Telecom Italia SpA. (TIT)
Orange Austria posted sales of 578 million euros in 2010, down from 595 million euros the year before and 615 million euros in 2008.
France Telecom, the country’s former phone monopoly, last year began a review of European assets as it rebalances its portfolio toward emerging markets. The Paris-based company last month agreed to sell its Swiss unit to Apax Partners LLP for 1.6 billion euros. France Telecom may also sell its stake in a Portuguese mobile operator.
“They’re very keen on exiting operations where they don’t have market power,” said Alexander Wisch, an analyst at S&P Capital IQ Equity Research. “The Austrian market is the most competitive in Europe.”
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