Strong 3G growth helps HTIL jump back to profits

PUBLISHED : Wednesday, 09 May, 2007, 12:00am
UPDATED : Wednesday, 09 May, 2007, 12:00am
 

Hutchison Telecommunications International, a unit of conglomerate Hutchison Whampoa, rebounded to a first-quarter profit of HK$220 million from a HK$24 million loss a year ago, driven by strong growth in its third-generation mobile business.


The company told its shareholders meeting its two major markets, Hong Kong and Israel, signed up more new 3G customers who spent more than the traditional 2G users. The introduction of i-mode technology in the first half could further encourage 3G subscriptions, the telecommunications firm said.


The number of Hong Kong's 3G users grew 18.6 per cent year on year in the first quarter to 818,000, while the number in Israel reached 333,000, Hutchison Telecom said. Total customers grew to 6.6 million, excluding India, by the end of March, up from 6.3 million a year earlier.


Hutchison Telecom has agreed to sell its Indian business, Hutchison Essar, to Vodafone Group for US$11.1 billion, a deal expected to be completed before July. The Indian unit accounted for 67 per cent of Hutchison Telecom's total income last year.


'Substantial interest income from the stake sale could offset the negative impact of the loss of contribution loss from our Indian business,' chief executive Dennis Lui said.


The recent launch of the Vietnamese and Indonesian mobile businesses could be the company's a new growth engine, Mr Lui said. Hutchison Telecom planned to invest HK$5 billion to expand in the two markets, he added.


'Mobile penetration in those two countries is still low, giving us room to grow at relatively low operating costs. However, they can't replace the Indian division because of a different operating environment,' Mr Lui said.


Hutchison Telecom hopes the two markets will achieve positive earnings before interest, taxes, depreciation and amortisation after two years of operation.


Its Indonesian operation has launched with more than 30,000 distribution points in the main cities. Some analysts said Hutchison Telecom had to spend up to US$1 billion to build a nationwide network to compete with existing carriers.


Without the Indian operation, Hutchison Telecom's earnings this year and next were likely to slump 53 per cent and 58 per cent respectively, Citigroup said.


'Excluding the gains from the stake sale and profit from discontinued operations of the Indian units, we estimate HTIL will report a net loss of HK$793 million for this year, with the costs associated with start-ups in Indonesia and Vietnam,' the bank said in a report.


Shares of Hutchison Telecom slid 1.11 per cent yesterday to close at HK$16.02, widening this year's loss to 20 per cent. The Hang Seng Index has gained 2 per cent by comparison.


'Hutchison Telecom has been undervalued for a long time; the stock still has upside from potential announcements of acquisitions, asset disposals or a proven dividend policy,' said a fund manager at a Japanese asset management firm.


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