Hong Kong company reporting season

Citic Telecom sets sights on global expansion after mixed first-half earnings

Citic subsidiary pins growth hopes on Linx takeover and acquisition of Citic Networks stake

PUBLISHED : Tuesday, 16 August, 2016, 10:49pm
UPDATED : Tuesday, 16 August, 2016, 10:49pm

Citic Telecom International Holdings, a subsidiary of China’s largest conglomerate, plans to accelerate its international expansion after posting uneven financial results in the first six months of this year.

“The group has clear strategic targets,” Citic Telecom International chairman Xin Yuejiang said at a press conference on Tuesday.

Xin referred to increased global network coverage and enterprise services related to the company’s takeover of Amsterdam-based Linx Telecommunications in April, the acquisition of up to a 39 per cent stake in systems integrator Citic Networks and its new HK$850 million deal to buy the remaining areas it does not own at Citic Telecom Tower in Central.

Citic Telecom International, which is 58.66 per cent owned by parent Citic, on Tuesday reported a 3.2 per cent increase in interim net profit to HK$410 million from a year earlier on decreased corporate expenses and steady growth at its enterprise solutions business.

Revenue, however, was down 12.1 per cent to HK$3.82 billion amid a 25 per cent decline at its Macau-based mobile operation and an 18.6 per cent drop in its international voice call business.

Chief financial officer David Chan Tin-wai said the company’s mobile business in Macau was mainly hurt by the economic downturn.

He said the situation was exacerbated by the sharp fall in smartphone sales as consumers awaited the release of new handsets, especially Apple’s latest iPhone, in the second half of the year.

Chief executive Lin Zhenhui said Citic Telecom International expected to complete the restructuring of Linx’s telecommunications and data-centre service businesses this year.

Linx would add 13 more countries, including Sweden and Poland, to the network service coverage of Citic Telecom International.

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It would also widen the data-centre locations under information technology services subsidiary Citic Telecom International CPC, which plans to open new “cloud service centres” in the United States and Germany.

The Linx acquisition was earlier touted as a major foray into the Russian-speaking markets of Central Asia, which would bolster Citic Telecom International’s participation in projects under the “one belt, one road” initiative.

Lin said the Citic Telecom Tower deal was also intended to add more data-centre capacity.

Daiwa Capital Markets analyst John Choi said in a report that the deal for Citic Networks had yet to close.

He said it needed to pass the review of the National Development and Reform Commission and the Ministry of Commerce after receiving approval from the Ministry of Finance and the Ministry of Industry and Information Technology.