3G mobile start-up will be key to Hutchison's first-half results
Investor attention will be keenly focused on operating data for Hutchison Whampoa's start-up third-generation (3G) mobile service when the group reports what are expected to be a solid set of first half results this week.
The Li Ka-shing controlled conglomerate is tipped to report on Thursday a profit of HK$5.4 billion to $6.9 billion before exceptional items that include a US$400 million write-down of its investment in bankrupted backbone carrier Global Crossing.
Parent Cheung Kong (Holdings) was expected to post sharply lower profits for its core property division as a result of sluggish sales and weak flat sales prices.
Hutchison stock had rallied off improving investor sentiment towards its 3G ventures in Britain and Italy as a result of expected increasing subscribers following the decision to slash tariffs.
'We expect management to report accelerating subscriber growth and guide investors' expectations towards a further boost when the festive season arrives,' CLSA analyst Danie Schutte said.
In a report, Mr Schutte said steep handset subsidies and aggressive voice discounting would probably result in higher start-up losses, which he estimated to be between HK$2 billion to $3 billion and disappointing average revenue per user. Hutchison said in March it had provided for this year's start-up losses, which it believed could be contained below US$1 billion.
The firm had kept its latest subscriber numbers tightly under wraps but would probably announce 450,000 global 3G users across all markets, ING analyst Cusson Leung said. Of these, 275,000 would be from Italy and 175,000 from Britain.
That compared with May when the firm revealed 90,000 users in Italy and 25,000 in Britain. Under a new management team, Hutchison pushed an early summer sale in June that offered tariffs for as much as 30 per cent below its rivals.
Goldman Sachs European telecommunications team expected Hutchison to secure 12,000 British subscribers a week in June and have a subscriber base of 88,000 by the end of June. It estimated Hutchison would acquire 15,000 per week in July, 18,000 per week in August and end the third quarter with 312,000 subscribers in Britain. To reach its one million target, Goldman believed Hutchison would need to penetrate the low-end and pre-paid markets to boost subscriber base.
Most analysts expected a provision of up to US$400 million to be made for Hutchison's three-year investment in Global Crossing after it quit the rescue of the bankrupted telecoms firm in April.
An offsetting exceptional profit might include a 230 million euro (HK$2.02 billion) gain from disposing of its water business Powwow in January and subsequent selling down its Vodafone and Deutsche Telekom stakes, which netted more than HK$900 million.
Analysts said Hutchison could see a strong growth in its ports, retail and energy, a flat growth in property, and a decline in telecoms business because it was expanding in Australia and India. Mr Leung said: 'A re-rating will come only as we start to see consistent positive progress in the European 3G operations.'
Parent company Cheung Kong (Holdings) was expected to report a 29 to 32 per cent decline in its ex-Hutchison Whampoa profit to between HK$640 million and $700 million for the six months to June.
More results previews - B8
