India and Israel earnings anchor HTIL turnaround
Hutchison Telecom surges back into the black with a full-year HK$201m profit but decides against paying final dividend
Hutchison Telecommunications International Ltd (HTIL), the emerging markets telecommunications unit of conglomerate Hutchison Whampoa, swung into the black last year after a strong performance from its Indian and Israeli mobile-telephone operations.
The company reported earnings of HK$201 million, compared with a net loss of HK$768 million in 2005.
However, they were still lower than market expectations of between HK$324 million and HK$445 million.
Driven by the huge growth in the Indian mobile market, Hutchison Telecom said revenue grew 37 per cent to HK$33.4 billion from HK$24 billion in the previous year.
A combined 75 per cent of the revenue was contributed by the company's two core markets - India and Israel.
The Indian business, which was sold to Vodafone Group in January for HK$86.4 billion, contributed 49 per cent of the company's HK$10.1 billion in earnings before interest, taxes, depreciation and amortisation (ebitda).
Operating profit at the company's other growth driver, Israel, doubled to HK$1.71 billion from a year earlier.
Hutchison Telecom said it had no plans to declare a final dividend despite the good results.
'We intend to announce a new dividend policy during the interim results in August,' chief executive Dennis Lui Pok-man said.
Last month, the company proposed a special dividend of HK$6.75 per share following the completion of its 67 per cent stake sale in Hutchison Essar, the fourth-largest mobile operator in India, which had been the company's largest contributor since it was listed in 2004.
Hutchison Telecom earlier said that it had agreed to pay a fee of US$415 million to Essar Group, the Indian operator's remaining stakeholder, in a bid to avoid any claims that might delay the transaction from being completed by the end of June.
Mr Lui said the loss of contribution from India would be replaced by new markets such as Vietnam, Indonesia and Sri Lanka.
Hutchison Telecom plans to spend as much as HK$5 billion to fund expansion in Indonesia and Vietnam.
'I expect the two countries to achieve at least ebitda positive after two years of operation and further to reach operating profit a year thereafter,' Mr Lui said.
Hutchison Telecom has also allocated about US$3 billion to invest in other new markets to diversify investment risks and seek opportunities to increase its presence globally.
The company, which owns telecommunications operations in eight markets, including Hong Kong and Macau, said its subscriber base rose 75 per cent to 30 million by last year, helped by the doubling of customers in India to 23 million.
The company's Hong Kong business, which has been weighed down by the launch of third-generation services, returned to an operating profit of HK$247 million, from a net loss of HK$420 million in 2005.
It has signed up 800,000 3G users in the city, accounting for 38 per cent of its subscribers in Hong Kong and Macau.
'It is expected that there will be a sharp fall on HTIL's earnings in the coming two years, given the high start-up costs and the heavy capital expenditure,' said a fund manager at a Japanese asset management company.
Shares of Hutchison Telecom climbed 0.37 per cent to close at HK$16.30 yesterday.