Hutchison completes acquisition of Orange Austria

Moody’s tags the acquisition credit positive.

Hutchison 3G Austria (3 Austria; unrated), a wholly owned subsidiary of Hutchison Whampoa Limited (HWL; A3Negative), recently announced the completion of its €1.3 billion acquisition of Orange Austria.

"The acquisition is credit positive as it allows 3 Austria to gainvaluable market share in a highly competitive market and a larger
platform from which to expand its ARPU enhancing LTE services," saysLaura Acres, a Moody's Senior Vice President.

"The acquisition will also be immediately EBITDA accretive to the tune ofapproximately €130 million per annum and result in cost savings of some €500 million according to management" adds Acres.

Here’s more from Moody’s:

The net consideration for the acquisition is about €1 billion, as about €390 million of assets, including prepaid mobile operator Yesss! Telekommunikation GmbH, were sold to Telekom Austria Group as a precondition of the acquisition.

Moody's understands that the deal is to be initially funded with cash on hand, although this may well be replaced with debt finance. Assuming the entire acquisition is funded by debt, Moody's estimates adjusted net debt/ capitalization ratio will increase modestly to about 43% from 41% based on pro forma LTM June 2012 results.

Although the acquisition would add some €1 billion of net debt to HWL's balance sheet, the impact is negligible as 1) the size is relatively small in the context of the group, and 2) the acquisition is immediately EBITDA accretive.The acquisition, first announced in February 2012, has now been approved by the Austrian and European authorities and all conditions have been met.

The acquisition will consolidate the third and fourth largest operators in Austria, with 3 Austria becoming the third largest operator in the country with an approximate 22 % subscriber market share andestimated combined revenues of more than €700 million in 2011.

HWL's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's: (i)
business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk.

Moody's compared these attributes against other issuers both within and outside HWL's core industries and believes HWL's ratings are comparable to those of other issuers with similar credit risk.

Moody's compared these attributes against other issuers both within and outside HWL's core industry and believes HWL's ratings are comparable to those of other issuers with similar credit risk.

HWL is one of the largest Hong Kong-based conglomerates, with a strongpresence in Asia and Europe. Its six core businesses are: (1) ports and related services; (2) property and hotels; (3) retail; (4) telecommunications; (5) energy; and (6) infrastructure.