Dialing up

27 January 2015 By Una Galani Follow @ugalani

The $15 bln move by the Hong Kong tycoon to bulk up in UK mobile through his conglomerate Hutchison Whampoa may be the end of a difficult chapter. Li has struggled to profit from European 3G. By doubling down on the bet, he can build the scale needed to move forwards.

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Hutchison Whampoa announced on Jan. 23 exclusive talks to buy Telefonica’s British mobile unit O2 for up to 10.3 billion pounds ($15.4 billion).

The Hong-Kong listed flagship holding company of Li Ka-shing, Asia’s richest man, will pay the Spanish company 9.3 billion pounds upfront. It could pay another 1 billion pounds in “deferred upside interest sharing payments” if the combined business hits certain cash flow targets.

It could take around two years for the additional payment to kick in, according to a person familiar with the situation.

A deal would create Britain’s largest wireless carrier, shrinking the market to three players.

Last July, Hutchison completed its acquisition of Telefonica’s Irish unit for 780 million euros ($1 billion). In 2013, Hutchison also completed the acquisition of Orange Austria for about 1.3 billion euros.

3 Group Europe, a unit of Hutchison’s telecoms operations, operates in six markets. The unit delivered its first full year of operating profit in 2010.

(Additional reporting by Quentin Webb.)

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