Tycoon Li Ka-shing is weighing his options after European Union regulators vetoed his proposal to buy British mobile operator O2, because of concerns it would hinder competition and create higher prices, Bloomberg reports.
Li’s CK Hutchison Holdings Ltd. (00001.HK) wanted to merge its own 3 UK subsidiary with Telefonica SA’s O2 business.
CK Hutchison shares fell 0.9 percent Wednesday to HK$93.05 before the announcement.
Investor attention will now probably shift to another of Li’s proposed deals — a merger of its 3 Italia telecom business in Italy with that of VimpelCom Ltd.’s Wind Telecomunicazioni that would create the country’s largest carrier.
“With Asia saturated, investors were looking forward to the European telecom deals,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong.
Here are some of the possible next steps for Li, who’s worth about US$28 billion:
Double down on Italy
Hutchison wants to combine its 3 Italia’s assets with those of Wind Telecomunicazioni in a deal valued at 21.8 billion euros (US$25 billion).
The proposal would reduce the number of competitors in the country and pose some of the same issues for the European Commission as the O2 plan.
Still, the Italian government has said it won’t oppose the merger, unlike in Britain.
Hutchison could consider exiting the mobile-phone business in Britain and Italy, because boosting market share there without significant capital investment will be difficult, said Francis Lun, chief executive of Geo Securities Ltd. in Hong Kong.
“Hutchison overpaid to enter the mobile-phone business, and now the only way they can make money is by achieving economies of scale,” Lun said.
“It would be devastating to Li Ka-shing, as they’ll either have to get out or try for organic growth.”
Li could also just leave the businesses as they are, said Dickie Wong, executive director of research at Kingston Securities in Hong Kong.
In Britain, subscriber numbers are rising, and profits — measured in terms of earnings before interest, taxes, depreciation and amortization — rose 25 percent to 686 million pounds (US$991 million) last year.
In Italy, ebitda climbed 11 percent to 276 million euros (US$315 million).
“Telecom is one of their key focus areas, and they did the best they could,” Wong said.
“They’re likely to take the wait-and-watch approach.”
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