Hutchison takes KPN to court over £1bn loan for mobile operator 3

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The mobile phone operator 3 was dealt another blow yesterday after a damaging row broke out between its majority shareholder, Hong Kong's Hutchison Whampoa, and a second shareholder, the Dutch telecoms group KPN Mobile.

Hutchison has launched legal action against KPN Mobile after it refused to stump up its share of a £1bn loan for the third-generation mobile phone operator 3. "We have instituted legal proceeding in London against KPN Mobile for breach of contract and to claim damages for that breach," a spokeswoman for Hutchison said.

KPN retaliated by saying it would "strenuously resist" those claims and by saying it believed Hutchison was, in fact, in "material breach" of the shareholders' agreement itself.

Hutchison owns 65 per cent of 3, KPN Mobile has a 15 per cent share and Japan's NTT DoCoMo has a 20 per cent holding.

3 had asked the three shareholders in March for the £1bn loan. While both Hutchison and NTT DoCoMo stumped up their share, equivalent to £850m between them, Hutchison then went on to finance KPN's £150m share after the Dutch firm refused.

KPN had previously written £6bn off the value of its third-generation phone licences in Germany, Belgium and the UK. It said yesterday it thought Hutchison was in "material breach" of the shareholders' agreement because of the Hong Kong firm's "continued support of an invalid funding call".

Furthermore, it said it had served notice on Hutchison, on 27 May, to force it to buy its 15 per cent stake in 3 "at 140 per cent of the fair price" - something, it says, it was entitled to do under the shareholders' agreement.

Hutchison responded by "seeking a declaration" that the funding call was "a valid funding call under the shareholders' agreement" and by seeking unspecified damages. It is also asking for KPN's shareholding in 3 to be diluted since it did not back the fundraising.

The move is the latest in a string of blows for 3, which recently slashed the price of its 3G service in the UK to try to stimulate sales. The business has attracted just 25,000 users in the UK so far, making it unlikely it will even get close to its target of 1 million customers in the UK by the end of the year.