Long-suffering shareholders in Hutchison Telecommunications Australia Ltd today approved the dramatic $2.85 billion recapitalisation by its Hong Kong parent, Hutchison Whampoa.

The enormous convertible preference share offering is out of the money but underwritten by Asia’s richest man, Li Ka Shing, so Hutchison Whampoa is expected to lift its stake from 58% to 98%.

As One-tel discovered, taking on Telstra, Optus and Vodafone is an expensive business and Li Ka Shing has dropped billions underwriting the rollout of the “3” business in Australia.

Hutchison’s Australian offshoot was floated at $5 in August 1999 when $215 million was raised from the public. The stock is now trading at just 17c and today’s meeting was dominated by debate about whether the Hong Kong billionaire should have mopped up the minority shareholders rather than pursue this “privatisation by stealth” recapitalisation.

Justin Gardiner, the former chairman of the HIH audit committee, was the lead independent director defending the deal today. It was a very ordinary performance that none of the four Hutchison Whampoa directors bothered to front the meeting in suburban St Leonards.

Chief executive Nigel Dews, the McKinsey man who Fred Hilmer appointed to rollout the F2 strategy at Fairfax, was remarkably upbeat about the operating performance of the business over the past year which is now finally EBITA positive with promises of positive cash flow by the end of calendar 2007.

However, us small shareholders struggled to cope with such optimism given the scale of the financial disaster that has befallen Hutchison Telecommunications Australia. Institutional shareholders have long abandoned the stock so there was only about 12 million genuinely independent shares voted on the deal by “mums and dads”.

The Hong Kong parent couldn’t vote but it was still comfortably passed because the shares would go to zero if it walked away from the $3.6 billion debt pile which has swamped the company.

Hutchison Whampoa has ploughed more than $10 billion into Australia and has had a much better time in the energy and infrastructure sector, although the Cross City Tunnel wipe out has also been painful.