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The Australian sharemarket is waiting to see whether Telecom will spend A$300 million ($347 million) to retain its 19.9 per cent stake in Hutchison Telecommunications Australia's (HTA) 3G business.
Mobile phone service provider Hutchison yesterday said it planned to raise up to A$2.85 billion in a move that would enable it to pay down debt and speed up its push toward profitability.
Telecom's shareholding is in HTA subsidiary Hutchison 3G Australia Ltd (H3GA).
"It is likely that H3GA will also go through a recapitalisation, but the terms of that recapitalisation have not been finalised," a Telecom spokeswoman said yesterday.
The Australian newspaper today said the market across the Tasman was watching to see whether Telecom would spend a further A$300 million to maintain its stake in the 3G business.
"Our understanding is that the commercial arrangement between TNZ and H3G on technology access remains unaffected by the potential dilution," the newspaper quoted Citigroup as saying.
"All things considered, given our current view for HTA, we believe TNZ should not contribute further equity into H3G."
Hutchison's offer is being underwritten by its Hong Kong-based parent Hutchison Whampoa, which owns 57.7 per cent of the Australian subsidiary.
That means Hutchison Whampoa, controlled by Hong Kong billionaire Li Ka Shing, has promised to buy any shares in the offer not taken up by other shareholders.
That would see its stake jump to between 70 per cent and 97 per cent and signalled that the group had not yet thrown in the towel on its business in Australia despite a number of senior industry figures suggesting consolidation was needed in the A$11 billion mobile sector, The Australian said.
Optus chief executive Paul O'Sullivan recently said he did not believe there was room for four mobile network operators in Australia -- echoing comments by Telecom chief financial officer Marko Bogoievski at an analyst conference last week.
HTA chief financial officer Tim Finlayson was reported yesterday saying Hutchison might raise less than A$2.85 billion through the rights issue, depending on how much Telecom would spend to help refinance H3GA, The Dominion newspaper said today.
Under the terms of an agreement Telecom and Hutchison signed at the beginning of this year, Telecom had to contribute funding to H3GA on a pro rata basis to any funding made by Hutchison.
So if Hutchison used money raised through the issue to pay down debt in H3GA, Telecom would also be required to put in more money.
If Telecom did not take part in a recapitalisation of H3GA on a pro rata basis, its holding in the venture would be diluted.
- NZPA
