HUTCHISON Telecommunications International Ltd, the mobile carrier that holds US$4.6 billion in cash after selling its Indian unit, said the company may not make an acquisition this year because values of emerging-market phone companies haven't fallen enough.
"We are not optimistic" a deal can be made in the second half, the Hong Kong-based company controlled by billionaire Li Ka-shing said yesterday. First-half profit plunged 98 percent on lower one-time gains than last year, when Hutchison Telecom sold its holding in India's third-biggest mobile carrier, Bloomberg News said.
Chief Executive Officer Dennis Lui, 57, has said Hutchison Telecom will invest in emerging markets to revive earnings growth with proceeds from the stake sale and may return surplus cash to shareholders if a deal is not reached this year. Prices of telecommunications assets have not declined significantly enough, the company said yesterday.
"There is still a lack of opportunities and it's still hard to buy any telecom companies without offering a premium to the market price," said Sachin Mittal, a telecommunications analyst at DBS Vickers Ltd in Singapore. "Whatever price you want to pay, there's always someone willing to pay a higher price," said Mittal, who doesn't cover Hutchison Telecom shares.
Hutchison Telecom, in which Li's Hutchison Whampoa Ltd owns 59 percent, joins regional carriers including Singapore Telecommunications Ltd and Telekom Malaysia Bhd in seeking emerging-market phone assets to bolster earnings as growth in domestic operations stall.
Special dividend
The Hong Kong telco may pay a special dividend if it is unable to make an acquisition by the end of this year, Lui reiterated yesterday at a press conference. Hutchison Telecom is evaluating several investment targets and considers price demands in some of them "too high," he said.
"We continue to see that price expectations for emerging market telecom assets have not been significantly dampened," the company said. Hutchison Telecom said it had HK$35.8 billion (US$4.6 billion) of cash at the end of June.
Net income dropped to HK$1.17 billion, or 24 Hong Kong cents a share, from HK$70.1 billion, or HK$14.59, a year earlier, it said. Sales from continuing operations rose to HK$11.8 billion from HK$9.64 billion.
Hutchison Telecom booked one-time gains of HK$1.46 billion in the first half in Indonesia, where the company sold some of its radio transmission towers in the second quarter, the statement said. The Hong Kong carrier's first-half profit a year earlier included a gain of HK$69.3 billion from the sale of its 67 percent stake in India's Hutchison Essar Ltd to Vodafone Group Plc.
Last year, Hutchison Telecom used about US$4.1 billion of the US$10.7 billion proceeds from the stake sale in Hutchison Essar, now renamed Vodafone Essar, to pay a special dividend. The Indian carrier accounted for 72 percent of Hutchison Telecom's operating profit in 2006.
The Hong Kong company, which owns seven mobile-phone units in Asia and Middle East, derived 59 percent of its first-half operating profit from Israel, while its home market and Macau accounted for a combined 18 percent, the statement said.
Israel's Partner Communications Ltd, in which Hutchison Telecom owns 51 percent, last month reported second-quarter profit rose 8.4 percent to 247.3 million shekels (US$69 million) after the company added subscribers.