New focus expected to see the firm rise from the 'bottom of its earnings curve' City Telecom (CTI), having posted an 80.7 per cent regression in earnings for the year to August, says a new focus on its fixed-line businesses should reinforce earnings next year. Chairman Ricky Wong Wai-kay said his company's loss-making pay-television operation would break even by the end of next year while recurring revenue from its contract customers for voice and broadband services would lead the group into growth over the next few years. 'We have successfully transformed ourselves into a true fixed-line focused company from an IDD company,' Mr Wong said. 'Going forward, you can expect stable growth from our fixed-line business.' Mr Wong described last year's performance as 'the bottom of our earnings curve'. For now, about 85 per cent of the group's net fixed assets are related to its fixed-line business. The company's net profit plunged to $49.55 million from a record gain of $257.74 million in the previous year. Performance was dragged down by $44.5 million in start-up losses at its broadband pay-television business and operating losses of $65.32 million for voice and broadband services. The magnitude of the percentage decline was distorted by a high comparison base in the previous year, when the company recorded an extraordinary gain of $84 million from a one-off wholesale telecommunications charge rebate from PCCW. Despite a profit warning issued in August, CTI shares fell as much as 10.96 per cent after the results announcement yesterday but the loss narrowed to 0.64 per cent and the stock closed at $1.54. Mr Wong admitted that the disappointing results also involved a 12 per cent increase in operating costs to $793.13 million. The company spent as much as 40 per cent of its contract revenues on acquiring new customers, which included the cost of distributing promotional freebies such as household electronic goods. He also pointed out that his optimism over next year's earnings was contingent on price stability in the fixed-line segment, which has seen significant price erosion this year. Mr Wong said his company's pay-television service, which charges customers $128 per month, had 31,000 customers at the end of August. He projects 150,000 pay-television customers by the end of next year. The company had 250,000 installed fixed lines, with a further 16,000 customers using its recently launched voice-over-internet-protocol service. Operating profit for the IDD business dropped 50 per cent to $126.14 million, although total traffic volume increased 13.5 per cent to 1.01 billion minutes. Intense competition in the IDD market has sparked a two-year price war. CTI is not paying a final dividend. It paid an interim dividend of 1.5 cents per share.