Hutchison one-off gains to offset 3G losses

March 28, 2005

Hutchison Whampoa will likely report much higher losses from its 3G mobile phone business in 2004 when it announces its results on Thursday but it is expected that one-off gains from share sales and profits from other businesses will more than cover the shortfall, reported the Hong Kong Standard.

Net profit for Hutchison could grow about 10.7% to HK$15.93 billion, which is the average estimate of 17 brokerages polled by Reuters. However, analysts said Hutchison's expected switch to new accounting standards could increase the margin for error in their forecasts.

The period for amortisation of subscriber acquisition costs (SAC) could be reduced from 36 months to 12 months if Hutchison decides to adopt the International Accounting Standards (IAS) to calculate its 2004 earnings.

This treatment of costs to acquire new subscribers would bring Hutchison more in line with other European telecom firms, but the impact to its 2004 accounts could be a negative HK$10 billion, CSFB analyst Peter Hilton said.

The new accounting system came into effect in Hong Kong in January but is only mandatory for earnings calculations starting 2005. However, Hutchison Telecommunications International said it would adopt the IAS for its 2004 results.

UBS analyst Paul Cheung estimates the impact of the new accounting standards would widen losses for the 3G business this year. Earnings before interest and tax will show a HK$33.5 billion loss for 2004, compared to the HK$18.3 billion EBIT loss in the previous year, Cheung said.