City Telecom returns to the black

PUBLISHED : Saturday, 19 May, 2007, 12:00am
UPDATED : Saturday, 19 May, 2007, 12:00am

City Telecom, one of Hong Kong's largest fixed-line carriers, returned to profit in the first half after cutting expenditure and operating expenses and on improved performance by its broadband business.

The company posted a net profit of HK$18.23 million, or 2.9 HK cents a share, for the six months to February, from a net loss of HK$55.17 million, or 9 HK cents a share, a year earlier, even as revenue fell 3.6 per cent to HK$562.37 million.

An interim dividend of 4 HK cents per share is the company's first payout to shareholders in two years.

Broadband customers spent more than a year earlier, with blended average revenue per user (arpu) rising 42 per cent to HK$175 a month from HK$123 a year earlier. The company forecast further strong gains as it seeks higher-paying customers.

'We intend to seek high-quality customers instead of making price cuts to get low-spending users,' chairman Ricky Wong Wai-kay said. 'I expect blended arpu to reach HK$300 by the end of next year on the back of anticipated tariff increases.'

Earnings before interest, tax, depreciation and amortisation rose 72 per cent to HK$188.2 million. Ebitda margin, a measure of profitability, increased to 33.5 per cent from 18.8 per cent a year earlier.

Fixed telecommunications services, which accounted for 71 per cent of group revenue, drove growth with an 8.9 per cent gain in turnover to HK$413 million, and a segment profit of HK$39.5 million from a loss of HK$54.9 million.

The business offset a downturn in the company's international telecommunications services, in which revenue fell 25 per cent to HK$166 million from HK$223 million and profit dropped 37 per cent to HK$23 million.

The company cut capital expenditure to HK$70 million in its first half, from HK$234 million, while adding 4 per cent or 25,000 more subscribers for free and paid fixed-line and broadband services to 641,000.

To tap more users, the company plans to increase its network to reach two million homes, up from 1.3 million, and connect to more than 1,800 buildings in the commercial market from 750.