City Telecom's (CTI) growing fixed-line subscriber base, up more than 125,000 during the last two years, bodes well for the future, but there is some concern over possible deterioration in the telecom's IDD business, says DBS Vickers Securities. The brokerage warned it has cut City Telecom's IDD pricing in the first half of full-year 2004 by 10 per cent and full-year earnings by 21.6 per cent. The revision however does not change the investment case for the company, with the brokerage maintaining a 'buy'' recommendation on the share with a one-year target price of HK$3.80. The counter closed on Friday at $2.40. DBS Vickers says the CTI fixed-line network is one of the best in Hong Kong in terms of technology and coverage. Growth momentum remains strong with about 10,000 new subscribers per month. Despite the declining IDD pricing, CTI's share price will be protected by the nine times 2004 price to earnings ratio and 3 per cent yield. A new fibre network due next year, along with a new marketing campaign targeting the commercial market, will help boost CTI's long-term fundamentals. In December CTI reported that annual net profit surged 183 per cent to $258 million over 2002. The growth was driven by the booking of $84 million in refunded universal service charges as well as development of fixed-line services and improved IDD margins. The Hong Kong subscriber base expanded from 21,000 in 2002 to 146,000 in 2003, equivalent to an 8.2 per cent residential market share.