Profits stable for Hutchison but 3G to get worse in 2004

March 18, 2004

Hutchison Whampoa said Thursday its net profit was flat in 2003 and warned the heavy losses in its 3G operation would get worse in 2004. Despite a series of setbacks in its 3G business, the firm is still bullish it will reach its break-even target.

The firm has 1.04 million 3G users globally and is recently signing up 10,000 subscribers a day. Chairman Li Ka-shing said the pace should speed up when new handsets become available on the market next month. Early 3G handsets from Hutchison were short on battery life and were big in size.

- 3UK has added 151,000 customers since December 12 2003, giving a total customer base of 361,000
- The ARPU of 3UK customers now stands at £45
- ThreePay, its pay-as-you-go offer, has been well received by retailers and consumers since its launch
- 3 now has 1,038,000 customers globally
- 3 Italy has 453,000 customers
- 3 Hong Kong has 36,500 customers

The average revenue per user (ARPU) for 3G mobile service in Britain was £45 pounds a month while ARPU for the Italian market stood at Euro 42.

Li said 3G takes a long time to be profitable and added "3G will still have a loss in 2004".

Hutchison's 2003 net profit totalled HK$14.38 billion and beat analyst forecasts for a full-year profit of HK$13.4 billion. Its 3G business booked an after-tax loss of HK$9.7 billion for the full year. (£1 = HK$13.4350)

"The most difficult year is behind us now," Li said.

Hutchison lessen the loss from 3G by releasing all HK$7.8 billion provisions, which were previous gains that it didn't book. The sale of its shares in Vodafone and Deutsche Telekom raised HK$2.6 billion. The sale of its Hong Kong fixed-line phone business added an additional HK$1.3billion. However, the one-off gains were partly offset by the HK$3.1 billion write-off in the bankrupted US undersea cable operator Global Crossing.

Hutchison is expected to float its Indian mobile phone business to offset losses in 3G in 2004 but Li ruled out the sale of Canadian oil producer Husky Energy this year, which enjoyed a strong year thanks to high oil prices. The port operation remained the biggest earnings contributor for Hutchison while its retail business proved profitable with the inclusion of Dutch health and beauty chain Kruidvat that it bought in 2002.

Managing director Canning Fok is adamant Hutchison's 3G business will break even by the end of next year despite the firm pushing back the target to 2006 in November. Fok also said Hutchison was considering deploying NTT DoCoMo's i-mode service in Hong Kong. The Japanese mobile carrier threatened to pull out of the 3G venture in Britain, which it is currently holding a 20% stake, because Hutchison had no plans to introduce i-mode in Britain.