Hutchison to raise $2.85b in new equity

Stuart Corner
Monday, 19 March 2007 09:54

IT Industry - Deals

Hutchison Telecommunications (Australia) (ASX: HTA), the operator of the '3' network, plans to raise $2.85 billion in equity by way of a pro rata renounceable rights issue of convertible preference shares.


The move would greatly ease the, reported, $22 million per month burden of servicing the company's multibillion debt. HTA ended 2006 with debt of $3.7 billion and a further $1.2b of debt funding available.

"With 3 now being EBITDA positive and the business' operating performance firmly established, the rights issue will allow HTA to improve its capital structure for the benefit of all shareholders," chairman Canning Fok said.

For the year to 31 December 2006, HTA reported positive EBITDA of $30.2 million, a turnaround of $195.8 million from 2005. However its net loss blew out to $760 million from $547 million in 2005, largely due to the $308m cost of closing its CDMA network.

According to the company, the capital raising is strongly supported by Hutchison Whampoa Limited (HWL), which through its wholly-owned subsidiary, Hutchison Communications (Australia) Pty Ltd (HCAPL), currently has a 57.82 percent shareholding in HTA, HTA says "is committed to maintaining a listing for HTA on the Australian Stock Exchange."

A separate company Hutchison 3G Australia, 60.1 percent owned by HTA and 19.9 percent owned by Telecom New Zealand owns and operates the network and provides the services on it. Telecom NZ has been reported indicating that it would be prepared to lift its stake in Hutchison.

HTA CEO, Nigel Dews, said: "The company has undertaken a thorough review of the alternatives for recapitalisation, and has selected the convertible preference share option as being in the best interests of all shareholders." In a statement the company said it had undertaken an extensive review of its capital structure, "during which a number of recapitalisation alternatives were assessed."

It is anticipated that shareholders will be offered 20 CPS for each HTA ordinary share held. The issue price will be 21 cents per CPS, which is the 10-day volume weighted average price immediately prior to the date of the announcement. The CPS will be convertible into ordinary shares at a conversion ratio of 0.85 HTA ordinary shares per CPS after the second anniversary of issue date.

The largest shareholder, Hutchison Communications (Australia) Pty Ltd (HCAPL) intends to take up its full pro rata entitlement. The balance of the offer will be underwritten by Hutchison Whampoa.

In his 2006 results presentation Dews said: "the company is now focused on exiting 2007 with positive operating cash flow...With 3G market growth accelerating, and as migration activity from competitors 2G networks increasing, we are well placed to attract more customers to 3. Operationally we will strengthen our 3G market leading position with the highest levels of content and other non-voice service usage and innovative new services...HSDPA rollouts are already complete in Sydney, Brisbane and Canberra and will be complete across all other cities by the end of March 2007 with data speeds ranging from 600 kbps to 1.5 Mbps, with theoretical maximum speeds of up to 3.6 Mbps. Further upgrades already planned for later this year will provide network speeds in timeframes consistent with the expected availability of appropriate handsets and datacards."