HKT mulls rate rise amid profit gain

PUBLISHED : Friday, 10 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 11:20pm


HKT Trust and HKT, which runs the biggest fixed-line network in Hong Kong, expects to raise broadband rates after posting major gains in its first interim financial results since November's initial public offering.

'Hong Kong wages are going up, electricity is going up and rents are really going up. So like any business, our costs are going up,' Alex Arena, HKT's group managing director, said yesterday.

'We have to pass some of that to the consumer. That means our broadband prices, at this stage, are more likely to go up than down.'

HKT Trust and operating firm HKT represent the telecommunications business that was spun off by billionaire Richard Li Tzar-kai's PCCW, which holds about 63 per cent of the total issued share stapled units in the city's first listed business trust. For the six months ended June 30, HKT said its net profit rose 45 per cent to HK$778 million from HK$537 million a year earlier. It attributed that rise to its steadily growing mobile and broadband service businesses.

Total revenue was up 2 per cent to HK$9.71 billion from HK$9.54 billion the previous year.

Earnings before interest, tax, depreciation and amortisation - representing net cash flows from the company's operating activities - advanced 3 per cent from a year ago to HK$3.74 billion.

Macquarie Securities analyst Lisa Soh said HKT's interim numbers were in line with her estimates.

She gave the stock a 'neutral' recommendation, which is equivalent to a 'market perform' rating.

HKT chief financial officer Susanna Hui Hon-hing said the company was 'entering the second half in relatively robust shape' and on track to meet its financial forecasts for the full year.

Hui pointed out that the group's first-half adjusted funds flow (AFF), the measure by which the cash distribution to a business trust's share stapled unit holders are based, reached HK$1.43 billion. That already represented 56 per cent of the forecast HK$2.57 billion AFF for the full year.

Arena declined to say how much of an increase in broadband rates HKT would pursue.

'I think you'll find our prices will stay reasonable, based on a worldwide comparison,' he said.

'I think the consumer has really had a great deal in the last 10 years in terms of price reduction, but that can't continue forever.'

HKT's broadband subscriber base grew 7 per cent in the first half to 1.54 million users from a year earlier. Subscribers to the firm's 3G and 4G mobile networks also expanded 7 per cent to 1.6 million from 1.5 million the previous year.

Its high-speed 4G network was launched in May and is expected to match the coverage of its 3G network by the end of this year.

The price of HKT Trust and HKT's share stapled units edged up 0.48 per cent to close at HK$6.23 yesterday.

Arena said the prices of these units 'have held up well relative to the overall volatility in the stock market'. 'We will continue to invest to support the steady demand for our high-speed fibre broadband and wireless services,' he said.