Hong Kong telecoms giant HKT sees a likely rate increase amid hefty network investments
HKT Trust and its operating arm HKT, which runs Hong Kong's largest mobile and fixed-line networks, expect to see further tariff increases for its services as long-term investments are made on its vast telecoms infrastructure.
Alex Arena, the HKT group managing director, said on Wednesday that the level of rate adjustments in Hong Kong will be "determined by market forces".
"Pricing is always a difficult thing in any business," Arena told a press conference.
"Obviously, in our business we have to make long-term investments. A lot of this stuff we're doing, like rebuilding our mobile network, doesn't come cheap."
HKT, the telecoms arm of billionaire Richard Li Tzar-kai's PCCW group, completed its US$2.43 billion acquisition of rival CSL New World Mobility in May last year.
The enlarged operation made it imperative for HKT to pursue a network integration plan that cuts the number of cell sites, while upgrading capacity.
The company is also continuing to expand its optical fibre infrastructure to residences and commercial buildings throughout Hong Kong.
It estimated that its high-speed fibre broadband now covers 81.8 per cent of the city, in which fibre-to-the-home service can be made available within four days of receiving an order.
"We constantly have to look at what our cost base is, what the rate of pricing is, and what an adequate return is," Arena said.
"So you've seen some upward adjustments in services over the last year or so. I can't say that costs are going down any day soon. There is still cost inflation in Hong Kong."
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HKT Trust and HKT on Wednesday reported solid financial results for the six months ended June 30. Net profit rose 27 per cent to US$228 million, up from US$180 million in the same period last year.
Group chief financial officer Susanna Hui hon-hing attributed that gain to strong mobile revenue after CSL's business was integrated.
Consolidated earnings before interest, taxes, depreciation and amortisation -- a measure of a firm's operating profitability -- increased 30 per cent in the first half of this year to US$740 million, up from US$567 million in the previous year.
Total revenue grew 28 per cent to US$2.048 billion from US$1.605 billion a year earlier.
Arena said the growth of HKT's mobile business was mainly driven by its subscribers' higher data usage, rather than brisk smartphone sales.
HKT's mobile operation, which has a customer base of 4.65 million as of June 30, recorded a 108 per cent jump in first-half revenue to US$775 million from US$373 million in the same period of 2014.
Service-derived revenue climbed 97 per cent year-on-year to US$588 million, while smartphone sales soared 151 per cent year-on-year to US$187 million.
That compares favourably to other mobile network operators, according to Arena.
"The other guys are producing stunning numbers based on handset sales," he said.
"We are not a Broadway or Fortress selling boxes. What we're selling is service," he added.
HKT also posted steady growth in the fixed-line telecoms market segment, despite discount pricing by competitors.
Its first-half revenue in this business advanced 6 per cent to US$1.301 billion, up from US$1.226 billion a year ago.
"Our customers are not easy to capture. They are very loyal," Arena said.
Both HKT's interim mobile and fixed-line sales were slightly ahead of earlier estimates made by Barclays.
The bank forecast a 104 per cent year-on-year increase in the mobile business and 2.7 per cent turnover improvement in the fixed-line segment.