Hutchison Telecommunications Ltd is planning a London flotation for its Orange mobile telephone network in the UK in the second quarter of next year, City gossips say, lighting the blue touch paper under the share price of 31.5% shareholder, British Aerospace Plc. However, Hutchison refused to confirm the date of flotation, saying that the story was just speculation. It said the timing of its flotation depended on stock market conditions and the profit growth of Orange. But it confirmed that, as an interim measure, the company would be seeking to borrow ú1,000m from banks in the form of a long-term debt. The new borrowings would be used to repay loans from Hong Kong parent Hutchison Whampoa Ltd, which owns 68.5% of its shares, and British Aerospace. In addition, it is thought that the new finance would aid the expansion of Orange’s network, which currently covers about three quarters of the country. The flotation rumour mill was given a boost last week after British Aerospace said it was investigating options for realising the value of its stake and that, aside from the ú1,000m bank finance, other options are opening up. The appeal of a flotation to British Aerospace is not hard to find: analysts say Orange’s value could be ú3,000m on flotation. After deducting the ú1,000m debt, British Aerospace’s share of the market capitalisation would be more than ú600m. Realising these profits would likely raise the value of its stake in Hutchison Telecom, in turn boosting its own share price and thereby providing a defensive barrier against a possible bid from General Electric Co Plc. However, market reaction to a flotation in under a year’s time may be mixed, with much depending on the profitability of Orange in the next six months. As reported recently (CI No 2,752), some analysts are doubtful of the company’s claims that the Orange network will profitable by the end of this year. The analysts have said that the network needs around 275,000 customers before it can get into the black. At the moment, the network has about 230,000 subscribers, which Hutchison said is well ahead of the the company’s projections, and is said to be growing by an average of 800 new users a day. If the network does not break even within the company’s time-frame, there will be obvious ramifications for the proposed listing on the Stock Exchange.
