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China Mobile swoops on "3"

Politics forces Hutchison to sell UK and Italy?

Internet Security Threat Report 2014

Updated By end of Friday, Hutchison Whampoa will have announced the sale of its European 3G franchises - both in the UK and in Italy - to China Mobile; thus confounding the hopes of European operators like TIM and Vodafone of picking up some cheap spectrum.

The deal is being finalised today, as 3 UK sends out sample X Series products.

Price? Ordinary commercial considerations, say sources, don't apply here. "You could say that the Chinese authorities gave Hutchison a simple choice of whether to sell to China Mobile, or alternatively, to sell to China Mobile," said one cynical-sounding insider.

In the last month, since NewsWireless revealed that Hutchison was looking to sell its European operation, the parent company has been desperately trying to talk the price up by teasing observers with "official denials" that the company was for sale, thus inviting serious approaches.

Vodafone's Arun Sarin, expected to be an ex-CEO in the short term, has said publicly that he would be interested in buying 3 UK, and the owners of TIM in Italy have also been talking, along with delegations from O2/Telefonica.

"It all turns out to have been a smoke-screen, really," said an insider. "Hutchison will probably never disclose what they got paid for the European operation, but if you could find out, you would probably decide that free market economics were not involved."

Speculation being all that is possible, few will put a cash value on the sale. Some will point out that 3 UK has been poorly managed, in the eyes of the Hong Kong bosses, with unacceptably high rates of user churn. They will put a low value on the company to China Mobile.

Others will point to the importance China Mobile places on expansion outside China, and guess a higher purchase price.

Nobody is likely to guess a figure higher than the £4.2bn originally paid by Hutchison for the UK 3G wireless spectrum, however. And several guesses will be that China Mobile is spending substantially below that. One insider, involved in one of the other bids, said that "the figure is not unrelated to the name of the company, but you can't quote me..."

In a sense, the news, when it breaks, will justify those who have been writing down the official line from Hutchison CEO, Canning Fok - who has said that 3 is not for sale, despite the stories in NewsWireless.

Even after Fok admitted that he was reducing staff in the UK, most publications and analysts have accepted that the rumours were unfounded.

It turns out that - since the deal had already been done in principle and only details remained to pin down - it was true: inasmuch as the company was not "for sale" because it was actually already sold, in all but name.

The sale is unlikely to affect the UK operation substantially in the short term. The rollout of the X Series will continue, say sources.

Update

3 insists no sale is on the cards, saying Friday that "Hutchison Whampoa is 100% committed to 3 in the UK. It has categorically denied that it has plans to sell any of the 3 Group businesses. Beyond that we don't comment on rumour and speculation."

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