Rationale
The agreements extend the existing arrangements between Hutchison, NTT DoCoMo and KPN Mobile and position them to secure the maximum benefits from the European 3G mobile multimedia opportunity whilst preserving the flexibility of the parties to achieve their own strategic objectives.
Benefits
The agreements combined will allow each party to extend substantially its European footprint whilst sharing the costs of growing their 3G businesses. Such co-operation strengthens the ability of the parties to secure 3G licences in the target markets. It will also secure time-to-market advantages and generate significant economies of scale in product development, network procurement and construction as well as content and other supplier relationships.
European customers will derive substantial benefits through enhanced service offering and service innovation.
Key features of the agreements
UK
NTT DoCoMo will acquire a 20 per cent. stake in Hutchison 3G UK Holdings Limited ("Hutchison 3G"), KPN Mobile a 15 per cent. stake and Hutchison will retain the remaining 65 per cent. interest (including 6.5 per cent. allocated for the remaining option of Telesystem International Wireless Inc. ("TIW") to acquire shares in Hutchison 3G). Hutchison will receive 1.2 bn pounds for the stake sold to NTT DoCoMo and 0.9 bn pounds for the stake sold to KPN Mobile (out of which approximately 50 mn pounds will be payable to TIW for waiving its option to acquire 3.5 per cent. of Hutchison 3G). NTT DoCoMo will appoint three directors, KPN Mobile two directors and Hutchison seven directors. (If TIW exercises its option so as to acquire at least 5 per cent. of Hutchison 3G, it will also be entitled to appoint one director and Hutchison will be entitled to appoint one additional director).
Germany
Hutchison and KPN Mobile will form a new consortium, to be named E-Plus - Hutchison, which will bid in the German Universal Mobile Telecommunications Service ("UMTS") licence auction. The auction is due to begin at the end of July. This demonstrates the parties' commitment to secure a licence.
If successful in the auction, KPN Mobile will transfer its interest in the consortium to E-Plus. The consortium will then jointly build a UMTS network complying with the licence conditions and the commercial plans of both Hutchison and E-Plus. In addition, Hutchison and E-Plus will each own separate businesses which will utilise the core network. Each separate business will develop its own intelligent platform enabling it to offer innovative services, which will compete against each other in the German market.
There will also be commercial co-operation between the new network company and E-Plus'existing 2G network so as to maximise cost savings and other efficiencies.
France
Hutchison, KPN Mobile and NTT DoCoMo have committed to work together exclusively to participate in the French UMTS licence award process. Discussions with potential key strategic French partners are underway. It is anticipated that the business will be conducted as an integrated network and operator company.
Belgium
Hutchison and KPN Mobile have also agreed to work together, through a joint bidding consortium, in the Belgian UMTS licence award process. Both business models of an integrated network and operator company and a single network company with independent operators are being considered.
The arrangements implemented by the agreements are subject to any required regulatory and corporate approvals.
Additional areas of potential co-operation
Additional areas of potential co-operation being addressed are: mobile multimedia, wireless portal, common branding across markets, joint procurement of infrastructure equipment and handsets, joint R&D projects and applications development, 3G roaming across the parties' networks and shared customer service centres.
Hutchison, NTT DoCoMo and KPN Mobile will continue to explore jointly further strategic opportunities where commercially attractive.
Strategic investment by NTT DoCoMo in KPN Mobile
NTT DoCoMo and KPN Mobile also announce today the finalisation of the terms of their strategic partnership as announced on May 9, 2000. NTT DoCoMois acquiring a 15% equity stake in KPN Mobile for a cash consideration of approximately 4.0 bn euros, receiving 176.5 million Class A shares in KPN Mobile at a purchase price of 22.68 euros per share.
Li Ka-shing, Chairman of Hutchison, said:
"We are extremely pleased to enter into these agreements with NTT DoCoMo and KPN Mobile to further the development of our 3G business in Europe. We will work together to maximise the benefits for all parties whilst using different structures to enable each of us to pursue our individual objectives."
Dr. Keiji Tachikawa, President of NTT DoCoMo, said:
"We are truly excited by this opportunity to accelerate the deployment of mobile multimedia services in Europe. We consider the European market to be a key element in our global strategy. Europe will be next after Japan to implement UMTS and will provide an opportunity for us to leverage our technology and experience to successfully develop new 3G businesses on the global scene."
Paul Smits, President and CEO of KPN Royal Dutch Telecom, said:
"This co-operation enables us to execute an aggressive pan-European strategy for successful development of 3G applications. Teaming up with NTT DoCoMo and Hutchison will add to our strong operational presence and network capabilities and enhance scale and time-to-market advantages that are critical to succeed in the 3G field. The partnership with NTT DoCoMo enables us to launch new value-added mobile multimedia initiatives."
For information:
A media conference will be held today at 11:00 a.m. London time at The Commonwealth Club, 18 Northumberland Avenue, London WC2. The telephone dial-in for the media conference is +44 (0)20 8240 8248 (password: Triumph). Electronic copies of the presentation and this press release will be available at www.ireporter.net/hutchison. Video footage of the media presentation will also be made available at this website.
Note to Editors
Hutchison Whampoa Limited
Hutchison Whampoa is a Hong Kong-based conglomerate with origins dating back to the 1800s. With a market capitalisation in excess of US$ 60 billion, Hutchison Whampoa is one of the largest companies in Hong Kong. With over 80,000 employees worldwide, Hutchison Whampoa operates five core businesses in 24 countries: ports and related services; telecommunications and e-commerce; property and hotels; retail and manufacturing; and energy and infrastructure. Hutchison Whampoa's telecommunications businesses and holdings span several continents, and include such diverse products as mobile telephony (voice and data), fixed line services, fibre optics broadband networks, web hosting, ISP and ICP services, paging, trunked mobile radio, VSAT and radio broadcasting.
Hutchison 3G is a UK company, which was established by TIW and which secured, with the assistance of Hutchison Whampoa's commercial and financial support, the largest of the five UK UMTS licences in April 2000 with a bid of O.4 billion. Hutchison 3G will hold the licence, build, own and operate the network and provide services to customers.
NTT DoCoMo
NTT DoCoMo is Japan's largest mobile communications company with a market capitalisation of US$279 billion. As of June 2000, the company had more than 30 million subscribers. It had consolidated operating revenue of 3.7 trillion yen (approximately US$34.7 billion) in fiscal 1999 (year ended 31 March 2000). NTT DoCoMo was formed in July 1992 to take over the mobile communications operations and sales of Nippon Telegraph and Telephone (NTT). NTT DoCoMo provides nationwide services, including cellular, PHS phone, paging, satellite mobile communications and maritime and in-flight telephone services. The company also has subsidiaries in the United States, France and Brazil. In February 1999 NTT DoCoMo launched its "i-mode" service, which provides continuous connection with the Internet via mobile phones. The number of subscribers to the service exceeded 8 million at the end of June 2000. NTT DoCoMo plans to introduce third-generation mobile communications services based on its W-CDMA system in May 2001. The UMTS services planned to be introduced in Europe will be based upon NTT DoCoMo's W-CDMA technology. The company is listed on the Tokyo Stock Exchange.
In December 1999 NTT DoCoMo acquired 19 per cent. of Hutchison Telephone Company Limited and today announced the finalisation of its 15 per cent. investment in KPN Mobile.
KPN Royal Dutch Telecom and KPN Mobile
KPN Royal Dutch Telecom ("Royal KPN") is the leading telecommunications company in the Netherlands with a market capitalisation of 48 bn euros. It provides the whole range of telecommunication, information, communication and technology services in the Netherlands and operates internationally under its own name or with partners. Royal KPN is pursuing growth in four core business areas: fixed telephony, mobile communications, IP/data services, Internet, call centre and media services.
Following completion of the strategic partnership with NTT DoCoMo announced today, KPN Mobile will be an 85%-owned subsidiary of Royal KPN. It was established as a separate legal entity in November 1999.
KPN Mobile is a leading European mobile telecommunications network operator and provider of mobile voice and data services. KPN Mobile is currently active in the Netherlands, Germany (E-Plus), Belgium (KPN Orange), Hungary (Pannon), Ukraine (UMC), and Indonesia (Telkomsel). The acquisition of a 77.5% interest in German operator E-Plus in February 2000 has transformed KPN Mobile into a pan-European operator with over 9 million customers. The completion of the strategic partnership with NTT DoCoMo marks a further step in KPN Mobile's strategy to become a pan-European integrated mobile voice and data operator.
Merrill Lynch International, which is regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting for Hutchison Whampoa Limited ("Hutchison Whampoa") and no-one else in connection with the disposal by Hutchison Whampoa of part of its indirect interest in Hutchison 3G UK Limited to NTT DoCoMo, Inc. and KPN Mobile N.V. and co-operation arrangements in relation to UMTS applications in Germany, France and Belgium (the "Transactions") and will not be responsible to anyone other than Hutchison Whampoa for providing the protections afforded to the customers of Merrill Lynch International, nor for giving advice in relation to the Transactions.
This announcement does not constitute an offer or invitation to purchase or subscribe for any securities and neither it nor any part of it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever nor is this announcement a solicitation of an offer to buy or subscribe for any securities.
Copies of this announcement are not being, and must not be, mailed or otherwise distributed or sent in or into, the United States, Canada, Germany, Australia or Japan. Custodians, nominees and trustees should observe these restrictions and should not send or distribute this announcement in or into the United States, Canada, Germany, Australia or Japan.
Certain statements in this document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties and are based on current expectations regarding important risk factors. Statements contained herein regarding the consummation and benefits of the proposed Transactions, as well as expectations with respect to future interest receivable, ability to sustain margins, and realisation of financial and operating synergies and efficiencies, are subject to known or unknown risks, uncertainties and contingencies, many of which are beyond the control of Hutchison Whampoa, NTT DoCoMo, Inc. and KPN Mobile N.V. (the "Parties"), which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. Factors that might cause forward-looking statements to differ materially from actual results include, among other things, requirements imposed by regulatory authorities to permit the transaction to be consummated, competitive factors in the industries in which any of the Parties or Hutchison 3G UK Holdings Limited ("3G HoldCo") competes, changes in the monetary and interest rate policies of the Bank of England and other G-7 central banks, inflation, deflation, the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries, fluctuations in interest rates, equity prices and foreign currencies, the adequacy of loss reserves, the inability to hedge certain risks economically, changes in consumer spending and other habits, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which any of the Parties or 3G HoldCo and their affiliates operate.
None of the Parties or 3G HoldCo, or any of their respective affiliates, advisers, directors, officers, employees or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document.
This document does not constitute an offer or invitation to purchase or subscribe for any securities and neither it nor any part of it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever nor is this document a solicitation of an offer to buy or subscribe for any securities.
