2nd UPDATE: Hutchison Telecom '09 Net Jumps; Restates '08 Results

Billionaire Li Ka-shing's Hutchison Telecommunications International Ltd. (HTX, 2332.HK) wiped away roughly US$97 million in profit from its 2008 financial results at the prodding of U.S. regulators, a move its parent company said wouldn't affect its US$545 million offer to take full control of the unit.

The move, disclosed Thursday as Hutchison Telecom reported its 2009 financial results, comes as a result of questions raised by the U.S. Securities and Exchange Commission over how the company accounted for the US$500 million sale of tower stations in Indonesia. Last month, Hutchison Telecom unexpectedly delayed releasing its 2009 results, citing the SEC inquiry.

The dispute had raised concerns that it could cause trouble for the offer by its parent, Li's Hutchison Whampoa Ltd. (HUWHY, 0013.HK), to purchase the roughly 40% stake in Hutchison Telecom it doesn't already own. The deal is being closely watched as a glimpse into the investment strategy of Li, Hong Kong's richest man and controller of a sprawling global empire that includes everything from ports to drugstores.

"We have sought and received confirmation from the offerer that the proposal for privatization remains unaffected by the decision of the company to amend and restate its previously reported accounts," Hutchison Telecom Chairman Canning Fok said in a statement.

The 2008 restatement, combined with a one-time gain of 6.33 billion Hong Kong dollars (US$817 million) from the sale of its Israeli unit, led to a quadrupling of its 2009 net profit compared with 2008. Hutchison Telecom said its net profit rose to HK$4.94 billion from a restated HK$1.13 billion in 2008. Previously, it had reported a 2008 profit of HK$1.88 billion.

The net profit came below the average HK$7.13 billion forecast of three analysts polled by Thomson Reuters.

Investors had been banking on the company to pay out special dividends from its cash reserves following a spate of earlier asset disposals such as the sale of its mobile-phone assets in India and Israel, but Hutchison Telecom said Thursday it won't pay a dividend for 2009.

Hutchison Telecom's results illustrate the weakened business that its parent has proposed to fully take over. Last year's profit came entirely from discontinued operations, while its continuing operations generated a loss of HK$2.59 billion.

What Li will do with the unprofitable leftovers of the company has been the subject of speculation in Hong Kong. The telecom company has in recent years disposed of crown jewel mobile-phone assets in India and Israel and spun off its profitable Hong Kong and Macau business, leaving a handful of Asian operations. Hutchison Whampoa said in January that Hutchison Telecom's weakened position made it "less suited to remain a publicly listed entity."

Hutchison Telecom's 2009 earnings were boosted by a HK$6.33 billion disposal gain from the sale of its 51.3% stake in Partner Communications Co. (PTNR, PTNR.TV) to Scailex Corp. (SCIXF, SCIX.TV). Fok also said the company remains in talks with state-owned telecommunications operator CAT Telecom Public Company Ltd. to sell its Thailand operation.

-By Lorraine Luk, Dow Jones Newswires; 852-2802-7002; lorraine.luk@dowjones.com

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