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  3. HTIL First Half Profit Boosted By HK$69.8bn Tax-Free Gain

HTIL First Half Profit Boosted By HK$69.8bn Tax-Free Gain

by Mary Swire,, Hong Kong

24 August 2007

First half profit at Hong Kong telecommunications company Hutchison Telecommunications International, part of Hong Kong tycoon Li Ka-shing's Hutchison Whampoa group, has soared as a result of a huge tax-free gain realised from the sale of its stake in an Indian mobile firm.

HTIL announced in its first half results that it had received a one-time gain of HK69.3 billion (US$8.9 billion) after it disposed of a 67% stake in Hutchison Essar, India's third-largest mobile phone company, to Vodafone. This gain represented almost all of HTIL's net profits for the period, which totalled HK70.1 billion. This compared to a profit of HK$2 million in the same period last year.

According to the Financial Times, Tim Pennington, HTIL chief financial officer, explained that because the transaction involved the sale of "one off-shore vehicle to another off-shore vehicle", the company was advised it did not have to make any provisions for capital gains tax.

Hutchison Whampoa announced in June that it had paid HK$124 million to raise its stake in Hutchison Telecom to 50% from 49.7%. This allowed the parent company to include the unit's income and assets in its accounts.

Excluding the contribution from the Group’s India operations during the reporting period, turnover from continuing operations increased 12.3% to HK$9,639 million, compared to HK$8,581 million in the same period last year. This was driven mainly by growth in the customer base, which increased 15% year-on-year to 6.8 million, higher usage, and higher revenue from mobile data usage.

The company paid a special dividend of HK$6.75 per share on 29 June 2007, but it is not expecting to announce a further dividend in 2007.

Commenting on the results, Dennis Lui, Chief Executive Officer of Hutchison Telecom stated: “The first half of 2007 marks a transformation period for Hutchison Telecom with several milestones achieved. In less than three years we were able to return to shareholders a special dividend which was more than the initial price of the shares at our IPO. We have also launched operations in Indonesia and Vietnam and have seen encouraging momentum in those high-growth markets. The Group’s Hong Kong and Israel businesses continued to deliver strong operational and financial performance in challenging market conditions and the Sri Lanka operations reported a record surge in profitability.”

Mr Lui added: “Hutchison Telecom has a proven track record in value creation. With our strong capital position and a well-balanced portfolio of high growth and cash-generating businesses, I am confident that attractive opportunities will present themselves to complement the continued development of the Company.”

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