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Hutchison Telecom ready to start 5G preparations

City’s second-largest mobile network operator reports 23pc drop in net profit for 2016 amid poor demand for smartphones

PUBLISHED : Tuesday, 28 February, 2017, 10:34pm
UPDATED : Tuesday, 28 February, 2017, 10:53pm

Hutchison Telecommunications Hong Kong, which runs the city’s second-largest mobile network, plans to start preparations for 5G after it reported earnings last year that missed analysts’ estimates.

“We have run a lot of tests,” Cliff Woo Chiu-man, the chief executive at Hutchison Telecom, said in a webcast media briefing on Tuesday.

“We have been studying the architectural changes for the network. As soon as the 5G spectrum is decided [by the government], we will start the actual work.”

Hutchison Telecom, a subsidiary of billionaire Li Ka-shing’s CK Hutchison Holdings, posted a 23 per cent decline in net profit last year to HK$701 million, down from HK$915 million in 2015, it said in a regulatory filing after the market closed on Tuesday.

The company attributed the decrease in profit to lower hardware sales because of a drop in demand for new smartphones, as well as weak revenue from roaming and international direct dial services.

Consolidated revenue last year fell 45 per cent to about HK$12 billion from HK$22 billion a year earlier.

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Consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda) – a measure of a company’s operating profitability – tumbled 12 per cent to HK$2.5 billion, compared with HK$2.8 billion in 2015

Those results for Hutchison Telecom last year were all below market analysts’ consensus estimates gathered by Bloomberg. They had estimated net profit to reach HK$744 million, revenue of HK$12.9 billion and HK$2.6 billion in Ebitda.

Hutchison Telecom, which runs mobile services in Hong Kong and Macau under its 3 brand, said its mobile business revenue decreased 55 per cent year-on-year to HK$8.3 billion mainly because of slow smartphone sales.

That operation, however, saw an increase in total subscribers to 3.2 million, up from 3 million in 2015,

which pointed to improved user satisfaction on 4G network quality and enhanced customer service, according to the company.

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“Every year, we look forward to Apple’s new mobile phone launch,” said Woo, in reference to a boost in sales generated by popular iPhone models like the iPhone 6 and 6 Plus back in 2014.

Hutchison Telecom’s fixed-line business advanced 4 per cent year-on-year to HK$4.1 billion. This improvement was attributed to higher revenue from the corporate and business market segments, as well as the international and local carrier markets, which partially offset lower revenue from the residential market due to keen competition.

The company’s fixed-line residential operations fall under 3Home Broadband, while its enterprise segments are under the Hutchison Global Communications brand.

Woo pointed out that many mobile network operators around the world are already preparing for the roll-out of 5G services ahead of the completion of universal standards for the advanced mobile system.

“We really hope the government will provide the spectrum [for 5G] and a timeline [for its release] soon, so we can kick off the work early,” he said.

Industry regulator the Communications Authority has repeatedly asserted that it will not allocate new radio frequencies for 5G before a global consensus on the next-generation mobile technology’s standards is reached in 2019.

HKT, the city’s largest telecommunications network operator, had earlier called for the release of new spectrum in the 3.5 gigahertz and 700 megahertz bands this year and other new spectrum next year. In Hong Kong, the 3.5GHz band is currently allocated for satellite services, while the 700MHz band is used for analogue television broadcast services.