Hutchison moves 3G profit goalposts
Hutchison Whampoa has renewed the timetable for its global US$22 billion 3G investment to break even, saying the business will only edge closer to an operating profit by next year, one year later than its original target.
Chairman Li Ka-shing previously said the company's 3G businesses in nine international markets would achieve break-even before interest, taxes, depreciation and amortisation (ebitda) by last year, and on earnings before interest and taxes (ebit) level by this year.
The management, however, said it now expected to break even on the ebit level by 2007, denying the new timeline was a delay.
Despite the new timeframe, analysts were enthusiastic about the prospects for the 3G, saying it had gone through the worst last year with operating losses at $36.28 billion from $38.45 billion a year ago.
They said that with the group showing an increasingly stable average revenue per user (arpu), and with its global 3G customers reaching a critical mass of 11.9 million, its new break-even target was achievable.
'In the coming years, no matter how many more handsets we sell, I can say that the revenue we can earn on each handset would beat the [customer growth rate] simply because our per-customer spending is increasing as they use more data services,' Mr Li said.
The news came yesterday amid the conglomerate's report of a slightly above consensus 11 per cent growth in its net profit to $14.34 billion, helped once again by exceptional gains from asset sales, revaluation of properties and windfalls from buying back assets at a lower price than their original cost.
The comparable net profit for 2004 has been restated to $12.98 billion, from the reported $16.13 billion, due to accounting changes.
Group managing director Canning Fok Kin-ning said using the original accounting standard, last year's net profit would be $18.1 billion, still a 12.2 per cent increase from the reported figure a year ago.
For the first time since the 2004 results, its 3G operating losses could be fully covered by an operating profit of $38.51 billion, up 16.6 per cent, on its established businesses which straddle ports, retail, infrastructure and energy, property and hotel operations.
In previous years, it had to rely on one-off windfalls from asset trades and property revaluation to cover earnings gaps created by 3G, whose losses would have wiped out all profit from the other established businesses.
One analyst said the brighter side of its 3G businesses was its stabilised arpu, which saw its customers spending Euro42.2 ($395) per month last year, from Euro43.11 in the first six months.
'There is no pressure to list the Italian or UK 3G businesses ... or even our retail or [other established businesses],' Mr Li said.
The group had to call off the listing for its Italian 3G business last month, following two previous failures to list.
Meanwhile, its port business remained the biggest contributor to the group's operating profit, up 14 per cent to $10.22 billion with combined throughput up 8 per cent at 51.8 million teu (20-foot equivalent units). 'We are either considering, or building, berths worldwide by the score,' Mr Li said.
Its infrastructure and energy business was helped by a $3.7 billion one-time profit booked by Cheung Kong Infrastructure from selling some of its Australian electricity distribution assets, while its retail business operating profit rose 2 per cent to $3.26 billion.