Thanks to iPhone, Li's 3G dream finally gains critical mass
After a decade of promises and billions of dollars in investment - one estimate puts the global phone bill at around HK$240 billion - the 3G dream might finally be coming true for Li Ka-shing's Hutchison Whampoa.
And it is largely thanks to Twitter, Facebook and other social media.
This emerged yesterday after the 3 Group, part of Hutchison's ports-retail-property-energy-telecommunications business, finally staunched nine years of red ink to emerge into the black last year. The 3G operation reported total earnings before interest and tax of HK$2.9 billion last year, albeit buoyed by a net gain equivalent to around HK$2.3 billion from a revised network-sharing agreement in Britain.
But what was also shown is that while 3G's global customer base, excluding Hong Kong and Macau, climbed 12 per cent last year to around 27.5 million phones, average revenue per user (arpu) fell 5 per cent, despite a 41 per cent surge in the non-voice revenue per user.
This suggested that people are messaging more and talking less.
As Canning Fok Kin-ning, group managing director, pointed out in a post-results briefing, the company in Britain had 10 per cent of the prepaid 2G and 3G sectors, but 40 per cent of the broadband market. He thought social media were helping to drive this growth.
Thanks to the iPhone, Fok said, 'the whole world understands what we're doing', which he cheerfully admitted was a lot more than it did in the past decade when people questioned the use and impact of 3G.
But he also pointed out that 3G's market penetration was still very low, with smartphones accounting for just 10 to 15 per cent of the total market.
Even so, 3G was no longer a drag on the company and instead 'had reached a critical mass and [it] will push us forward', Fok said.
As for the transition to 4G, Frank Sixt, Hutchison's group finance director, said the capital expenditure involved in shifting from 3G to 4G will be relatively benign because much of the infrastructure is already in place.
It is hard not to buy into the Fok-Sixt 3G critical-mass theory, although one part of 3G's Neverending Story is just when Hutchison will recoup its total investment. Ever-optimistic, Fok said: 'It's coming. Watch this space.'
But Hutchison is much bigger than just 3G. Paintings of 18th- and 19th-century ports and trading scenes on the walls of the 23rd-floor conference room at Hutchison House perhaps give a more accurate reflection of Hutchison's retail and trading background.
Sixt said 'people are less concerned about the outcome of 3G' and instead more attention is being paid to the other parts of the business. 'Our financial profile has never been stronger,' he said, buoyed by HK$45 billion in cash from the port trust listing in Singapore.
Which led Fok to comment that he thought investors undervalued Hutchison.
Asked if investors would value the company more if it was listed elsewhere, Fok replied, 'I love Hong Kong.' To which Sixt added: 'I love Hong Kong, too.' No secondary Singapore listing likely there then.
The 3 Group's average revenue per user fell 5 per cent, although non-voice revenue per user surged: 41%