3GScottishUser
30th March 2005, 11:43 PM
From Bloomberg (30/03/2005):
Hong Kong billionaire Li Ka-shing's biggest company, may report a drop in second-half profit as losses at mobile-phone networks in Europe and Asia erased earnings from asset sales and port operations.
Net income probably fell to HK$2.72 billion ($349 million) from HK$8.3 billion a year earlier, according to the median forecast of seven analysts surveyed by Bloomberg News before today's release. The wireless unit, which operates so-called third-generation networks under the 3 brand, probably had a HK$15.76 billion loss before interest and taxes.
Li's $22 billion bet on cell-phone networks that allow movie downloads and video conferencing is pitching Hutchison against the likes of U.K.-based Vodafone Group Plc, the world's largest wireless carrier. Mounting competition may force Hutchison to spend more and cut prices to gain subscribers, hampering efforts to cut losses.
``The question remains over the profitability and prospects for the 3G business,'' said Rajeev Gupta, who oversees $325 million at Basis Capital Pty in Sydney and holds Hutchison stock. ``They are cutting prices for their offering, and while some people view that negatively, it should spur demand.''
Second-half forecasts were derived by subtracting first-half figures published by Hutchison from full-year estimates. Earnings are due at 4:15 p.m. Hong Kong time.
Hutchison, which began wireless operations in Europe two years ago, has avoided direct competition as Vodafone, Orange SA and other carriers delayed opening high-speed networks amid a shortage of compatible handsets.
Higher Costs
The 3 unit had 5.9 million subscribers in seven markets including the U.K., Italy and Hong Kong in mid-December, up from 3.3 million four months earlier and 1 million a year ago. The forecast operating loss for the division compares with a shortfall of HK$14.4 billion in the second half of 2003.
Hutchison Managing Director Canning Fok has predicted the 3 division will break even on a monthly basis before interest, taxes, depreciation and amortization on a monthly basis beginning this year.
Hutchison bolstered handset subsidies and signed up prepaid customers to boost subscriber numbers, leading to lower average monthly bills and higher marketing costs. Average monthly revenue per user fell to 44.45 euros ($57.56) in November from 51.46 euros in July, while the average cost for signing up a user climbed to 270 euros from 252 euros.
As competition intensifies, ``the rate of average revenue per user decline and the level of subscriber acquisition costs will be of immense interest,'' Steven Li, an analyst at JPMorgan Chase & Co., wrote in a March 30 note to clients.
More Handsets
Hutchison's customer intake has been helped by more attractive and efficient 3G phones from handset makers including Nokia Oyj and Motorola Inc. Handsets using the technology now come in sizes comparable to traditional phones and with similar battery lives.
Nokia, the world's largest handset maker, plans to unveil 10 3G phones this year, or a quarter of its new models. Motorola, the No. 2, will ship 16 models using the standard, up from six in 2004.
Non-voice services such as data transmissions accounted for 21 percent of monthly bills in November, up from 15 percent in July, Hutchison said on Dec. 15. It didn't say whether the increase came from offerings such as music video downloads and video calls, services that require the capacity that 3G networks offer, or from more basic text messages.
``There's more variety and the handset quality is improving,'' said Ng Kong Yong, an analyst at Nomura Securities with a ``neutral'' rating on Hutchison. ``That will probably mean that people will shift more to 3G but it doesn't mean they'll use 3G services.''
Competition
The proliferation of 3G handsets has also brought competition. Vodafone began offering services under its Live! brand in November in the U.K. and Chief Executive Arun Sarin on Jan. 27 said the company is on track to reach 10 million 3G customers before March 2006.
Orange, the wireless unit of France Telecom SA, targets as many as 2 million 3G users in the U.K. by the end of 2006 and ``several hundred thousand'' subscribers in France. The company had 35,000 customers for its 3G service in February.
O2, Britain's second-largest mobile-phone operator, opened its high-speed network in the U.K. last month.
Losses at 3 have forced Li, 76, to rely on gains from asset sales and rising earnings at Hutchison's ports and retail divisions to bolster profit.
Ports, Retail
Profits from asset sales probably fell to HK$4.2 billion from HK$6.97 billion a year earlier, the analyst survey showed.
Hutchison on Oct. 8 said it will record a profit of HK$3.5 billion from the sale of shares in Hutchison Telecommunications International Ltd., which operates mobile-phone networks in Hong Kong, Israel and six other markets. Hutchison raised HK$7 billion in the IPO, a fifth less than its original target.
The ports business, which accounts for about a quarter of Hutchison's earnings, probably increased operating profit to HK$4.76 billion from HK$4.08 billion a year earlier because of rising trade between China and the rest of the world, the Bloomberg survey showed.
At the retail unit, which includes the A.S. Watsons beauty- and-drugstore chain and Fortress electronics outlets, operating profit may have climbed to HK$1.77 billion from HK$1.7 billion. Hutchison in January agreed to pay 346 million euros for Marionnaud SA, Europe's second-largest perfume retailer.
``The ports are doing well, and the retail business is doing well,'' said Jonas Kan, an analyst at Daiwa Institute of Research in Hong Kong. ``They're not using cash flow from those business to fund their 3G ambitions, so they shouldn't be burdened.''
http://www.bloomberg.com/apps/news?pid=10000080&refer=asia
Hong Kong billionaire Li Ka-shing's biggest company, may report a drop in second-half profit as losses at mobile-phone networks in Europe and Asia erased earnings from asset sales and port operations.
Net income probably fell to HK$2.72 billion ($349 million) from HK$8.3 billion a year earlier, according to the median forecast of seven analysts surveyed by Bloomberg News before today's release. The wireless unit, which operates so-called third-generation networks under the 3 brand, probably had a HK$15.76 billion loss before interest and taxes.
Li's $22 billion bet on cell-phone networks that allow movie downloads and video conferencing is pitching Hutchison against the likes of U.K.-based Vodafone Group Plc, the world's largest wireless carrier. Mounting competition may force Hutchison to spend more and cut prices to gain subscribers, hampering efforts to cut losses.
``The question remains over the profitability and prospects for the 3G business,'' said Rajeev Gupta, who oversees $325 million at Basis Capital Pty in Sydney and holds Hutchison stock. ``They are cutting prices for their offering, and while some people view that negatively, it should spur demand.''
Second-half forecasts were derived by subtracting first-half figures published by Hutchison from full-year estimates. Earnings are due at 4:15 p.m. Hong Kong time.
Hutchison, which began wireless operations in Europe two years ago, has avoided direct competition as Vodafone, Orange SA and other carriers delayed opening high-speed networks amid a shortage of compatible handsets.
Higher Costs
The 3 unit had 5.9 million subscribers in seven markets including the U.K., Italy and Hong Kong in mid-December, up from 3.3 million four months earlier and 1 million a year ago. The forecast operating loss for the division compares with a shortfall of HK$14.4 billion in the second half of 2003.
Hutchison Managing Director Canning Fok has predicted the 3 division will break even on a monthly basis before interest, taxes, depreciation and amortization on a monthly basis beginning this year.
Hutchison bolstered handset subsidies and signed up prepaid customers to boost subscriber numbers, leading to lower average monthly bills and higher marketing costs. Average monthly revenue per user fell to 44.45 euros ($57.56) in November from 51.46 euros in July, while the average cost for signing up a user climbed to 270 euros from 252 euros.
As competition intensifies, ``the rate of average revenue per user decline and the level of subscriber acquisition costs will be of immense interest,'' Steven Li, an analyst at JPMorgan Chase & Co., wrote in a March 30 note to clients.
More Handsets
Hutchison's customer intake has been helped by more attractive and efficient 3G phones from handset makers including Nokia Oyj and Motorola Inc. Handsets using the technology now come in sizes comparable to traditional phones and with similar battery lives.
Nokia, the world's largest handset maker, plans to unveil 10 3G phones this year, or a quarter of its new models. Motorola, the No. 2, will ship 16 models using the standard, up from six in 2004.
Non-voice services such as data transmissions accounted for 21 percent of monthly bills in November, up from 15 percent in July, Hutchison said on Dec. 15. It didn't say whether the increase came from offerings such as music video downloads and video calls, services that require the capacity that 3G networks offer, or from more basic text messages.
``There's more variety and the handset quality is improving,'' said Ng Kong Yong, an analyst at Nomura Securities with a ``neutral'' rating on Hutchison. ``That will probably mean that people will shift more to 3G but it doesn't mean they'll use 3G services.''
Competition
The proliferation of 3G handsets has also brought competition. Vodafone began offering services under its Live! brand in November in the U.K. and Chief Executive Arun Sarin on Jan. 27 said the company is on track to reach 10 million 3G customers before March 2006.
Orange, the wireless unit of France Telecom SA, targets as many as 2 million 3G users in the U.K. by the end of 2006 and ``several hundred thousand'' subscribers in France. The company had 35,000 customers for its 3G service in February.
O2, Britain's second-largest mobile-phone operator, opened its high-speed network in the U.K. last month.
Losses at 3 have forced Li, 76, to rely on gains from asset sales and rising earnings at Hutchison's ports and retail divisions to bolster profit.
Ports, Retail
Profits from asset sales probably fell to HK$4.2 billion from HK$6.97 billion a year earlier, the analyst survey showed.
Hutchison on Oct. 8 said it will record a profit of HK$3.5 billion from the sale of shares in Hutchison Telecommunications International Ltd., which operates mobile-phone networks in Hong Kong, Israel and six other markets. Hutchison raised HK$7 billion in the IPO, a fifth less than its original target.
The ports business, which accounts for about a quarter of Hutchison's earnings, probably increased operating profit to HK$4.76 billion from HK$4.08 billion a year earlier because of rising trade between China and the rest of the world, the Bloomberg survey showed.
At the retail unit, which includes the A.S. Watsons beauty- and-drugstore chain and Fortress electronics outlets, operating profit may have climbed to HK$1.77 billion from HK$1.7 billion. Hutchison in January agreed to pay 346 million euros for Marionnaud SA, Europe's second-largest perfume retailer.
``The ports are doing well, and the retail business is doing well,'' said Jonas Kan, an analyst at Daiwa Institute of Research in Hong Kong. ``They're not using cash flow from those business to fund their 3G ambitions, so they shouldn't be burdened.''
http://www.bloomberg.com/apps/news?pid=10000080&refer=asia