Hutchison Whampoa's Australian telecommunications subsidiary continues to bleed red ink, but the company is looking to the launch of its '3' third-generation (3G) mobile brand for salvation. This week, Hutchison Telecommunications Australia, 58 per cent owned by the Hong Kong group, announced a A$197.3 million (about HK$908.86 million) loss for last year - a 44 per cent deterioration on what was already a disappointing performance in 2001. The loss was struck on a 50 per cent fall in revenue, down to A$236.5 million from A$471.6 million. A look at those figures might suggest a company in trouble, but according to Hutchison official Steven Wright they simply reveal a company in transition. Last year Hutchison sold its old global system for mobile communications (GSM) customer base to rival Optus, slashing its revenue. And in the period leading up to the '3' launch it is incurring significant expenses while not having any revenue. The loss included almost A$85 million in charges relating to the development of '3', and without those costs the result - although still a loss - would have been an improvement on 2001. Hutchison paid A$196 million for its Australian 3G licence. Mr Wright said: 'We don't regard the results as a dark cloud needing a silver lining at all. It was a good story, which contained good news. 'Our Orange 2G business has broken through on operating cash earnings, and of course with '3' not yet launched there are going to be expenses which go straight to the bottom line. 'But the good news is that this work has positioned us to be ready to launch on track by the end of the first quarter of this year, within budget.' Hutchison's global operations are taking a significant risk in their plans to be the first-mover in the untried area of 3G mobile, and nowhere is the risk more transparent than in Australia. The Hutchison Whampoa parent has pumped an estimated A$1.8 billion into the Australian operation, and last year underwrote a A$600 million rights issue. Having sold off its old GSM customers - 260,000 of them - to Optus for A$43 million, Hutchison has made only a small impression with the Orange brand, which has an estimated 5 per cent market share despite massive advertising and sponsorship of the Australia-England cricket series. In this context, the '3' launch will be make or break for Hutchison in Australia. The mobile market is dominated by Telstra, Optus and Vodafone, but none have put a launch date on their 3G plans - all are watching Hutchison's sink or swim attempt. Hutchison's business plan is to target its rivals' high-end customers with '3', following on from a similar strategy with Orange. While its larger rivals continue to give away handsets, and are adding customers in the lower-value pre-paid sector, Orange's approach is to make customers pay for their phones, and attract a higher percentage of value post-paid customers, who pay more. At Optus, for example, average revenue per pre-paid customer is A$19 a month, while Orange's post-paid customers spend an average of A$61. Mr Wright said: 'When you are spending as much as we are preparing for a new business, paying interest costs and depreciation on existing networks, you realise there is some way to go before you can reach that final profitability at the bottom line. 'The Orange business has turned the corner, and added 70,000 customers to total 265,000 last year, and we expect that if we remain on course then Orange will be self-funding by next year's annual report.' If '3' can deliver, it will be the turnaround Hutchison in Australia has been waiting for after several years of disappointment. The shares, at about 30 A cents offer a cheap entry price for investors who are 3G believers, and plenty of blue sky. But only if 3G can deliver, and soon.
