KPN exits 3 UK

10 Nov 2003

Dutch operator KPN has agreed to sell its 15% stake in third-generation mobile venture 3 UK back to Hong Kong industrial conglomerate Hutchison Whampoa for GBP90 million, thus ending several months of dispute between the two companies. In June this year Hutchison began legal proceedings against KPN after the latter refused to loan GBP150 million to the venture, in which Japan’s NTT also owns a 20% stake, with Hutchison presiding over the remaining 65% of shares. The court action followed a request two months previously from Hutchison that KPN and NTT provide GBP150 million and GBP200 million respectively to help fund the UK business during its costly launch phase. Whilst NTT agreed to the investment, KPN did not, arguing that the agreement under which it acquired the 15% stake in 3 made no mention of funding issues. The Dutch telco then countersued Hutchison, demanding that the Hong Kong company buy its 15% stake at 140% of its original value. Friday’s agreement by Hutchison to repurchase the stake, thus increasing its shareholding to 80%, means the case will not go to court, thereby avoiding considerable legal fees which both companies can ill-afford. Hutchison has said it has made an initial instalment of GBP60 million to KPN, with the remainder to be paid in three instalments of GBP10 million in 2005, 2006 and 2007. KPN wrote off its investment in 3 UK in August 2002.

Hutchison has hailed the outcome as a success, claiming it represents ‘an attractive investment’. Hutchison has launched 3G networks in the UK, Italy, Austria, Australia and Sweden, and also holds UMTS licences in Denmark, Hong Kong, Ireland, Israel and Norway. At the end of June 2003 it claimed 520,000 subscribers across its operational networks, with Italy (300,000) and the UK (155,000) accounting for most of the total. Despite falling well behind in its bid to sign one million subscribers in each country by the end of the year, the operator remains bullish about its prospects, claiming that its seasonal promotional offerings in the UK, Italy, and Australia are being well received. Nevertheless, last month the company revealed it was planning to scale back its rollout plans in the UK, revising down the number of base stations it leases with Crown Castle, the company responsible for its tower management agreements. The two had agreed terms for 4,000 base stations over four years, but as a result of slow sales this has been cut to a minimum guaranteed figure of 1,350.

United Kingdom
Primetrica's GlobalComms Database