Word: telecoms
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...clearly taking a longer view. He can afford to. Due to Hutchison 3G's position as one company within a diversified conglomerate, it has the financial resources and management conviction to take chances when others must scale back. Furthermore, Li's strategy becomes more comprehensible when you see telecom as he does: It's not a life-or-death proposition for his company. It's an investment...
...course, the world's telecom-investment climate is considerably more frigid than it was just a few years ago. In 2000, when wireless mania was at its apex, everyone thought consumers were dying for high-speed networks and mobile phones that could stream video calls, download movie clips and access online game networks. Caught up in the high-tech hype, mobile carriers rushed into the future, spending a now seemingly absurd $89.5 billion on 3G licenses in Europe alone...
...receiving so little (WAP, anyone?) But Hutchison has decided the potential benefits, which could be vast, outweigh the risks, no matter how daunting. As a new entrant without any legacy network to upgrade, 3 is hoping to leapfrog the competition and establish an important early foothold in the telecom standard for the future?a future in which slower rivals are stuck with outmoded networks, just when consumer demand for high-speed wireless data service starts to sizzle...
...pushing forward at the moment of maximum pessimism? The short answer: because he is able to when no one else can. As the new entrant in a depressed sector and with the financial backing of a larger diversified company, Hutchison is rare among telecoms in that it is not really a telecom company at all. In Hutchison Whampoa's latest fiscal year, for example, telecommunications amounted to only 13% of total sales and 3% of earnings before interest and taxes. Hutchison Whampoa's management likes telecom's long-term prospects for fast growth and high returns, but only...
...Unlike Vodaphone, AT&T, Verizon and others, Hutchison Whampoa was comparatively unruffled by the bursting of the telecom bubble. The company was forced to cancel a recent bond offering and its stock is down 30% since the beginning of the year, but its cash hoard gives it plenty of room to maneuver. According to Nomura's estimates, Hutchison Whampoa has $14.5 billion in cash and liquid assets on hand, more than enough to cover the additional $10.2 billion the company will need to complete its multicountry 3G buildout. "Funny how people have been slagging off conglomerates for some time," says...