[3GScottishUser]

Li Ka-shing has pledged that Hutchison Whampoa’s losses from its third-generation cellular operations were narrowing and it was only a matter of time before they swung to profitability, but the latest results from the company’s Australian subsidiary haven’t supported the Hong Kong billionaire.

Hutchison Telecommunications Australia announced Tuesday that its net loss widened 39% to 759.4 million Australian dollars ($598 million) in 2006 from A$652.8 million ($514.4 million) the year before.

The deteriorating results included an A$307.9 million ($242.6 million) charge for shutting down its CDMA network to focus exclusively on third-generation service. Excluding those one-time costs, the picture is brighter — the group’s earnings before interest, tax, depreciation and amortization (EBITDA) were A$30.2 million ($24 million), an A$195.8 million ($155.5 million) turnaround on previous year and the company’s first ever positive EBITDA.

Hutchison Telecom Australia, which is 57.82%-owned by Hong Kong-based conglomerate Hutchison Whampoa (other-otc: HUWHY - news - people ) , launched Australia’s first 3G W-CDMA network in 2003. Operating under the Hutchison Whampoa global brand 3, it covers Sydney, Melbourne, Brisbane, Adelaide, Perth, Canberra, Werribee and Campbell.

When it closed its CDMA network last year, Hutchison Telecom Australia upgraded all it CDMA customers to its 3G network. As a result, 3G subscriber numbers rose to 1.245 million at the end of 2006, up from 1.04 million.

Like its parent company, Hutchison Telecom Australia has long been hampered by high costs in expanding its customer base. By virtue of upgrading its existing CDMA customers to 3G, Hutchison Telecom Australia reduced its average cost of acquisition for each new 3G customer by 32% in 2006, but the figure was still relatively high at A$274 ($216).

Its profit margin per 3G customer per month declined from A$55 ($43.30) to A$52 ($41.00) from December 2005 to December 2006, due to the integration of its former CDMA customers, which generated lower margins.

Average monthly revenue per unit for its 3G business also declined by 10% to A$71 ($56).

http://www.forbes.com/markets/commodities/2007/02/27/hutchison-australia-earnings-cx_vk_0227markets21.html

[getti]

What you need to remember though is 3 are still expanding their network in all their countries. Because they are a totally new network they have had all the costs of hardware, software, setting up and so on plus arranging deals with content providers.

If you take a look back at say T-Mobile or Orange when they launched their original network the costs were huge for them because of all the setup costs... this is just the same for 3 but years on from everyone else.

And to be fair, ok the company is loosing money but it's hardly £14bn like some other mobile network lost :D ;)

[3GScottishUser]

All of the networks have had to invest in start-up. All of them have had to construct new 3G networks, negotiate content, promote and subsidise handsets etc etc.

It's true that incumbents have large customer bases and have cashflow and an ability to migrate customers from older technology to 3G and that could just be the problem for HWL.

It's a very different market now than when HWL launched Orange in the 90's. Then the mobile market was expanding, now it saturated and the cost to gain customers has increased. Further the 3G services that were judged to be a huge advantage and could create an opportunity, hav'nt proved to be.

With HWL disposing of emerging markets businesses like Hutchison Essar in India the strain on the group business of the 3 venture is apparent. India and other developing markets are the growth areas now and the smart money chases growth.

Australia's figures provide an insight, and not a cosy one for HWL as they reveal falling revenues and growing losses in a market where 3 have always performed well in comparison with other markets. Italy is 3's European success story. It failed to attract investors and a planned IPO was cancelled. 2006/7 looks like being a very challenging year for 3 UK and the statistics HWL choose to publish in March will provide some idea of the state of the business.

All things considered 3G looks like it was not a brilliant prospect to build a business on alone. £14 billion of a loss (some very complex accounting adjustments included) is OK if there is a loger term prospect of some profit. HWL will have invested much more than that figure worldwide on 3 and four years on the red ink is still flooding the pages of their accounts.

[Ben]

and the company’s first ever positive EBITDA
*champagne corks pop*