Hutchison Pulls Out of German 3G Consortium

TOKYO (08/18/2000) - Hours after emerging victorious from more than two weeks of intensive bidding to secure a 3G (third-generation) wireless licence in Germany, Hong Kong's Hutchison Whampoa Ltd. announced it considers the price paid too much and will pull out of a consortium formed with KPN Mobile NV.

The surprising move was announced by Hutchison early Friday morning in Hong Kong simultaneously with the news of the auction win.

E-Plus Hutchison, a consortium formed by Dutch carrier KPN Mobile and the Hong Kong conglomerate, paid 16.4 billion marks (US$7.7 billion) for 10MHz of nationwide 3G frequency space in the auctions which are said to have raised five times the amount of money the German government had been hoping for. [See "Germany Awards Six 3G Mobile Licenses for $46.2B," Aug. 17.]KPN Mobile will purchase Hutchison's stake and become the sole owner of E-Plus Hutchison, the two companies said.

Explaining the move in a statement, Canning Fok, group managing director of Hutchison Whampoa, said his company found the cost to be "higher than expected" and that it had really wanted 15MHz of spectrum and considered the 10MHz of spectrum won would not be sufficient for its needs.

The German license bid was the first joint bid between Hutchison Whampoa and KPN Mobile since the pair announced an alliance in July to work together with Japan's NTT DoCoMo Inc. to secure and operate 3G services in major European markets. [See "Hutchison, DoCoMo, KPN Tie for 3G in Europe," July 12.]"Hutchison Whampoa Limited remains committed to its strategy to develop a pan-European 3G business," Fok said in the statement.

Diederik Karsten, chief executive officer of KPN Mobile, said in the same statement that the price paid was in line with the consortium's plans and not more than it had been expecting to pay. However, he confirmed Hutchison's view that 15MHz of spectrum was what the company had been aiming for all along.

"We are pleased to have been awarded the licence, the price is in line with the E-Plus business plan," Karsten said in the statement. "We do understand Hutchison's considerations with regard to the licence costs, because it makes a difference if you start as a new entrant or have already built up a position in the market as KPN Mobile did via E-Plus. Moreover, the partnership aimed at acquiring a 15MHz licence and share the vision that 10MHz now is seen as too tight for two operators."

A spokesperson for NTT DoCoMo could not immediately comment on the news.

Hutchison Whampoa, in Hong Kong, can be reached at +852-2128-1188 or online at http://www.hutchison-whampoa.com/.

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