Sunday Communications, Hong Kong's smallest mobile telephone company, has succeeded in more than halving its net loss to HK$212 million for last year, but has seen a sharp rise in the number of customers switching operators. The company's monthly churn rate - the proportion of customers that stop using the service - rose last year to 8.4 per cent, the highest among Hong Kong's six mobile operators. Group managing director Bruce Hicks said: 'Churn is the No 1 concern I am dealing with right now. I am not happy with the churn number.' The churn rate, which was 6.4 per cent in 2000, increased after Sunday ended promotional tariffs of as low as HK$38 a month. The company had 551,000 subscribers at the end of the year, up almost 34 per cent from the previous year. Mr Hicks said he had a number of projects in place to address the high churn rate. However, chief financial officer Janet Fung Ching-man said shedding low-tariff subscribers had helped Sunday's financial performance. For the year to December 31, the Hong Kong- and Nasdaq-listed company achieved its first operating profit of HK$102 million. Sunday has yet to report a net profit since it was founded in 1996 but last year's loss was 55 per cent lower than the HK$467 million it reported in 2000. Despite the operational improvement, average revenue per user fell 19 per cent to HK$219. Seventy-six per cent or 419,000 of Sunday's subscribers are contract, or 'post-paid', customers who pay bills in arrears. They are considered better quality than 'prepaid' customers who buy stored-value SIM phone cards. Analysts said the results were slightly better than market expectations but not good enough for them to upgrade Sunday stock. CLSA analyst Stephen Leung said: 'The [share price] driver has really been hopes of a merger.' Mr Hicks said an industry consolidation was inevitable although he was not sure whether it would happen in days or years. However, he said Sunday, as one of Hong Kong's four third-generation (3G) licence holders, would not be acquired. Last year, Sunday chose to pay HK$250 million in cash for its 3G licence - unlike the other three licence-winners which pledged bank credits. This lifted Sunday's annual net cash outflow to an historic high of HK$579 million. Ms Fung said the company was in talks with bankers to ease the terms of covenants on HK$1.8 billion of loan facilities signed in 1998. Sunday had total debt of HK$751 million at the end of last year, backed by HK$182 million in cash and a HK$930 million credit line.
