Sawiris Mulls US$6.3-bil. Bid for 3 Italia—Reports

Hutchison Whampoa's 3 Italia unit could soon change hands finally after Naguib Sawiris, the chairman of both Weather Investments and Orascom Telecom, offered four billion euro (US$6.28 billion) for it. In a report today, Italian daily, La Repubblica, said Sawiris, who is being advised by Credit Suisse, has already made the offer but Hutchison Whampoa is holding out for at least five billion euro. Hutchison Whampoa has been trying to divest from 3 Italia since September 2005 and the sale of 3 Italia could then lead to the sale of other assets of the 3 Group in Europe, especially 3 UK.

Outlook and Implications

• End in Sight? Any eventual sale of 3 Italia will finally bring to an end a process which has rumbled on since 2005. Hutchison Whampoa has always been open about its desire to divest from 3 Italia and has sought different options to do so. The Hong-Kong-based group first floated the idea of a US$3-billion IPO in September 2005 but was forced to delay it due to technical reasons by the Italian stock market regulator, Consob. Further delays later in 2005 and a realisation that bankers would not value the business as much as Hutchison had hoped for, finally led to the cancellation of the IPO. Instead, Hutchison sold a 10% stake in February 2006 to Goldman Sachs. By September 2007, The Times newspaper reported that Hutchison Whampoa has sent out an information memorandum in the hope of unearthing potential bidders for 3 Italia. The latest report in Italy's Il Sole Ore 24 in May 2008 suggested a two-billion-euro tax credit accrued from changes to the termination rate regimes in Italy was proving attractive to interested parties (see Italy: 23 May 2008: Changes to Termination Rates Prompts Interest in Sale of 3 Italia, 12 September 2007: Hutchison Whampoa Eyes Sale of 3 Italia—Reports, 13 February 2006: Hutchison Whampoa Scraps H3G IPO, Sells 10% Stake to Major Investment Bankand 21 September 2005: Hutchison Whampoa Vaunts US$3 bil. Italian IPO).

• Consolidation Beckons: For Weather Investment, the acquisition of 3 Italia would bring together the third and fourth-largest mobile operators in Italy—Wind and 3 Italia respectively. Weather owns Italian alternative telecoms group, Wind, which it bought from energy group, Enel, in 2005. Accordingly, the fusion of Wind and 3 Italia would give the combined group a 26.8% market share (end-2007 figures) in the Italian mobile market, compared to Telecom Italia Mobile's 40.3% and Vodafone's 32.9% market shares. Although the Wind/3 Italia entity would still be the underdog in the market, the new company will have closed the gap substantially and can thus stand its ground in the highly competitive Italian mobile market.

• Sawiris Sprawling Empire: The addition of 3 Italia will undoubtedly boost the telecoms empire under the control of Naguib Sawiris. From his control of Egyptian telecoms group, Orascom Telecom, the Egyptian businessman has branched out, using the Weather Investment vehicle to buy Wind in Italy and Hellas in Greece. His ambition to create a sprawling Mediterranean telecoms empire has yet to materialise though, but he has shown courage in investing in some trouble spots around the world. His Orascom group won a license to provide mobile services in North Korea, and is muted as a potential investor in Cuba. Orasom was also a key player in Iraq although Sawiris has eventually sold out to Zain in the country. However, the Orascom group still operates in many other markets including Egypt, Algeria, Tunisia, Zimbabwe, Pakistan, and Bangladesh. Weather owns a 50.1% stake in Orascom Telecom (see North Korea: 31 January 2008: Orascom Telecom Granted First Mobile Licence in North Korea).