CSL at crossroads as Telstra tightens grip | South China Morning Post
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New World Development

New World Development Co (HK stock code 0017) is a Hong Kong conglomerate with operations in property, infrastructure, transport, retailing telecommunications and bus and ferry operations.It is controlled by Chow Tai Food, a holding company owned by businessman Cheng Yu-tung.

CSL at crossroads as Telstra tightens grip

PUBLISHED : Tuesday, 24 July, 2007, 12:00am
UPDATED : Tuesday, 24 July, 2007, 12:00am

Mobile operator searches for direction as Australian parent reshuffles management


A recent management reshuffle at CSL New World Mobility, the city's largest mobile operator, finds the company at a crossroads while its Australian controlling shareholder, telecommunications giant Telstra, is reviewing its direction for the near future, market watchers said.


Telstra, which holds about 76 per cent of CSL, this month tightened its control of the Hong Kong arm by appointing the Australian company's deputy chief financial officer, Tarek Robbiati, as CSL chief executive.


Telstra last week also appointed Canadian Christian Daigneault as CSL's chief technology officer effective yesterday.


The appointments come as CSL, which has lost three senior executives in the past few weeks, battles to hold on to its more than 2.6 million users amid fierce competition in the saturated Hong Kong mobile market.


A company insider said Telstra management had changed CSL's direction since 2005 after Sol Trujillo took over as the Australian operator's chief executive.


'The previous Telstra chief executive was more hands-off'' regarding the team of former chief executive Hubert Ng Ching-wah and gave it 'full support,'' the insider said. On the other hand, 'the new Telstra chief is more involved in the Hong Kong business and is putting more pressure on the Hong Kong management.'


Mr Ng quit as chief executive last month after serving CSL, formerly the mobile arm of Hong Kong Telecom, for more than 15 years. Adam Wong Yuk-on, the director of mobile networks, the equivalent of chief technology officer, and who built up the city's first mobile networks, has also said he will retire next month.


Richard Midgett, CSL's former international and wholesale director, will join PCCW next month as managing director in wireless business.


'Telstra is tightening its control over CSL this year,' a market watcher said. 'The Australian management set a more aggressive target, which seems to be mission impossible in a crowded market like Hong Kong.'


Telstra, which in 2002 increased its 60 per cent stake in CSL to 100 per cent, merged the business in 2005 with smaller rival New World Mobility, keeping a 76.4 per cent holding in the new venture, leaving New World Development with 23.6 per cent.


The future of CSL might now lie in one of two directions, the source said.


The first is 'controlling capital expenditure and boosting profitability' to sell shares in the market or sell a controlling stake to competitors. The other is for Telstra to 'invest and commit in CSL for further growth'.


Telstra said in a transaction document in 2005 that CSL New World Mobility could launch an initial public offering after next year.


CSL's present performance should be acceptable in financial terms, an executive at a rival telecommunications operator said.


'At least the company is still the most profitable operator and holds the highest average revenue per user [arpu] in the market. But it also needs to cut its tariffs to lure new users.'


CSL made an operating profit of HK$333 million in the six months to December last year on revenue of HK$3.08 billion.


The company's premium line 1010 dominates the business executive market, which contributes high arpu through international roaming and email services such as Blackberry. Its other line, One2free, targets young users with mobile television and other value-added services.


'As the quality of voice service among operators is the same, the only differentiator is pricing,' the executive said.


CSL can expand its revenue stream through third-generation services such as mobile television, high-speed data access and music downloads, which can generate higher spending from users.


The source noted, however, that CSL 'finds it difficult to compete in the market through superior branding,' especially after SmarTone-Vodafone and PCCW aggressively launched new multimedia services, including HK$28 a month for internet access.


CSL is 'under a lot of pressure' to hold on to its customers.


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