Billionaire Li 'looking into options for fixed-line phone unit'

Sources say Mr Li Ka-shing is gauging interest from potential buyers for HGC.
Sources say Mr Li Ka-shing is gauging interest from potential buyers for HGC.

HONG KONG • Billionaire Li Ka- shing is exploring options for his Hong Kong fixed-line phone business, including a potential sale, according to people familiar with the matter, following a similar move by local property tycoon Peter Woo.

Hong Kong's richest man is gauging interest from potential buyers for Hutchison Global Communications (HGC), the sources said. They asked not to be identified because the discussions are confidential.

The company, which offers services for corporate customers over its fibre-optic network in the former British colony, may fetch at least US$1 billion (S$1.4 billion), the sources said.

HGC is owned by Hutchison Telecommunications Hong Kong Holdings, a listed arm of Mr Li's CK Hutchison Holdings conglomerate. There is no certainty the deliberations will lead to a transaction, and Mr Li may decide to keep the business, the sources said. A representative for Hutchison Telecom declined to comment.

Shares of Hutchison Telecom, which has a market value of US$1.4 billion, have lost more than half their value since their May 2013 high. The company said in February it will seek to penetrate new industry segments and tap its data- centre expertise as it grapples with declining residential sales.

Earnings before interest, taxes, depreciation and amortisation at Hutchison Telecom's fixed-line operations fell 2 per cent last year to HK$1.25 billion (S$225 million). 

"The peak of the business has passed," Mr Castor Pang, head of research at Core-Pacific Yamaichi in Hong Kong, said by phone on Monday. "Further investment in the business might not bring in a reasonable return for the firm."

The potential disposal follows the sale of a Hong Kong Internet provider owned by Mr Woo's Wharf Holdings for US$1.2 billion to a private-equity buyer group last year.

The consortium of MBK Partners and TPG Capital beat out other suitors including HKBN and SmarTone Telecommunications Holdings, people with knowledge of the matter said earlier.

HKT, a competitor to HGC that has the biggest market share in Hong Kong, warned in January of the "difficult operating environment" in the local telecommunications market. Competitors' discounting is driving down prices, the former phone monopoly said in a presentation after announcing its 2016 results.

HGC serves nine of the top 10 global investment banks, as well as a majority of Hong Kong government departments and public hospitals, and is an accredited service vendor with the city's stock exchange, its website shows.

The company's fibre-optic broadband network covers more than 1.8 million households and also carries traffic for wireless customers, according to Hutchison Telecom's annual report.

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A version of this article appeared in the print edition of The Straits Times on May 17, 2017, with the headline 'Billionaire Li 'looking into options for fixed-line phone unit''. Print Edition | Subscribe