Li turns a corner, runs into rivals

Almost two years after their launch, 3G mobile phones are finally catching on.

On Thursday, Li Ka-shing was able to boast that subscriptions to Hutchison's 3G services had climbed to eight million globally, an impressive gain from the one million customers the group had managed to pick up a year ago.

Those subscribers have come at a steep price. To persuade them to sign up, the firm has been forced to give away - or at least heavily subsidise - expensive new handsets. In the second half of last year, it paid an average ?271 ($2,738) for each new subscriber.

Worse, customers have been less than enthusiastic about the bells and whistles 3G offers, forcing Hutchison to drop prices to compete with second-generation operators. Last year, expensive extras like video calls and football reports accounted for only about 10 per cent of revenue. The rest came from old-fashioned telephone calls and text messages.

In Italy, Hutchison's biggest market, the average subscriber generated ?47 a month in revenues. At that rate, the firm needs to hold on to every customer for at least six months just to recoup the cost of signing him or her up - a tough task in a market where 90 per cent of subscribers prepay.

Small wonder then that Hutchison lost $37.49 billion on 3G last year.

Managing director Canning Fok Kin-ning insists the worst is over. He claimed the British business had been generating enough cash to cover its operating expenses since December and Italy would follow suit this month.