Earnings reports

Wharf Holdings Ltd

i-Cable sale up in the air as losses mount amid tough Hong Kong TV market

PUBLISHED : Thursday, 23 February, 2017, 6:47pm
UPDATED : Thursday, 23 February, 2017, 10:50pm

Shares of i-Cable Communications dropped to a five-week low on Thursday as the struggling pay-television and broadband internet service provider’s losses surpassed HK$300 million last year.

The continued bleeding will likely put more pressure on parent The Wharf (Holdings) to speed up its divestment of i-Cable, after its Wharf T&T subsidiary was sold last year.

“There may still be interest in i-Cable because it has content on its books, just like TVB,” Alfred Lau, an analyst at Bocom International, told the South China Morning Post.

The pay-television business of i-Cable is run by subsidiary Hong Kong Cable Television, which produces more than 10,000 hours of programming each year.

Net losses for i-Cable widened to HK$313 million last year, from HK$233 million in 2015, on the back of a weak advertising market and harsh competition in Hong Kong, according to its regulatory filing.

Total revenue decreased 7 per cent to HK$1.4 billion, down from HK$1.5 billion a year earlier.

Its shares fell 2.15 per cent to 91 Hong Kong cents on Thursday, their lowest close since reaching 90 cents on January 18.

“Recurrent losses have significantly weakened the liquidity position and increased the dependency on external financing, currently short term in tenor,” i-Cable said in its filing. “Initiatives to contain costs have been more effective than those to improve revenues.”

Its pay-television business segment revenue was down 8 per cent year on year to just over HK$1 billion, while its internet and multimedia business segment saw sales decline 4 per cent to HK$336 million.

Fast-track disposal of i-Cable stake tipped for Hong Kong’s Wharf

For the seventh consecutive year, the i-Cable board resolved not to declare any dividend.

The company said it will introduce new initiatives this year, but added “they may or may not produce the results that we need”.

It vowed to “exercise additional prudence” on investments in programming across platforms, upgrades on high-definition and over-the-top services, customer service improvement, so-called gigabit passive optical networks for higher speed broadband services, as well as new marketing and media initiatives.

The recent challenges for i-Cable have come amid a major transition in Hong Kong’s television industry, led by the introduction of free-to-air television channels.
PCCW-owned HK Television Entertainment, a free-to-air broadcaster, launched its Cantonese language service Viu TV in March.

Fantastic Television, an affiliate of i-Cable, is preparing to launch its free-to-air Cantonese channel in May this year.

Asia Television, the world’s oldest Chinese-language broadcaster, went off the air in May to end 59 years in operation.

The city’s pay-television industry has also changed, as over-the-top video-streaming service providers like LeEco and Netflix recently launched their operations.

Television Broadcasts last month scrapped its pay-television business, TVB Network Vision, and moved that operation to an over-the-top service business, following losses of more than HK$2.2 billion.

With i-Cable’s market capitalisation at HK$1.83 billion as of Thursday, Bocom’s Lau said its potential disposal by the Wharf group “would be a much smaller deal than the Wharf T&T transaction”.

In October, property giant Wharf group sold its fixed-line telecommunications service operations, Wharf T&T, to private equity firms MBK Partners and TPG Capital for HK$9.5 billion in cash.

Wharf T&T and i-Cable combined to form the Wharf group’s communications, media and entertainment business for more than 20 years. As part of its strategic review of that business, Wharf said in October that its disposal “would provide additional cash flow to the group for its future business development and investment opportunities”.