Global Insight Perspective | |
Significance | Orascom will exit from HTIL. |
Implications | After HTIL’s sale of its Indian asset, the investment in HTIL became of less strategic value to Orascom. |
Outlook | Orascom will continue to seek investment opportunities. |
Egypt-based Orascom Telecom yesterday announced that it had reached an agreement to sell its remaining 14.2% shareholding in HTIL. The shares are being sold to Hutchison Whampoa, controlled by Hong Kong billionaire Li Ka-shing, and Yuda Limited, an entity also controlled by Li. Hutchison Whampoa and Yuda will acquire 9.2% and 5% of HTIL’s stakes, respectively. The total proceeds from the sale will amount to HK$7.5 billion (US$960 million). In October and November 2007, Orascom announced a total sale of a 5% stake in HTIL for US$327 million. Upon completion of the transaction with Hutchison Whampoa and Yuda, Orascom will have completed the sale of all HTIL shares it had purchased. Hutchison Whampoa, as a result of the deal, will lift its interest in HTIL to 59.3% from 50.1%. Overall, Orascom will generate approximately US$600 million of cash profit (after interest charges) in a transaction which was 100% debt financed.
Outlook and Implications
Orascom acquired a 19.3% interest in HTIL from Hutchison Whampoa for a total of US$1.3 billion in December 2005. The company’s initial acquisition of HTIL stakes was to gain exposure to the Indian market, however, after the sale of the Indian asset, the investment in HTIL became of less strategic value to Orascom, according to a statement issued by the company's chairman, Naguib Sawiris. In May 2007, HTIL completed the sale of its 52% stake in Hutchison Essar, India's fourth-largest mobile operator then, for US$11.1 billion to U.K.-based Vodafone Group. As a result of the deal, Orascom received a special cash dividend of US$793 million in July 2007.
After the divestment of Hutchison Essar, HTIL now offers mobile and fixed-line services in Hong Kong, as well as mobile services in Macau, Israel, Indonesia, Vietnam, Sri Lanka, Ghana and Thailand. Having sold out a key revenue contributor and growth driver, the group’s business portfolio appears to be lacking a strong growth engine. Although HTIL has great hope for the fast-growing Indonesian and Vietnamese markets, its operations in the two countries are still at a start-up stage and are faced with intense competition from established players.
Orascom currently has investment in six high-growth mobile markets in the Middle East, Africa and South Asia, including Algeria (OTA), Pakistan (Mobilink), Egypt (MobiNil), Tunisia (Tunisiana), Bangladesh (Banglalink), and Zimbabwe (Telecel Zimbabwe) (see Middle East and North Africa: 3 December 2007: Orascom’s Nine-Month Profit Up 116%, Sells Iraqna for US$1.2 bil.). With the proceeds of the divestment of HTIL, Orascom said it would evaluate investment opportunities, including acquisitions of new licences and established operators of substantial size.