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Hutchison delay 3G break-even target

November 17, 2003

Hutchison Whampoa has revised the break-even target for its 3G mobile service business reported the Hong Kong Standard. The Hong Kong conglomerate has pushed back its break-even target of 2005 by one year to 2006 due to delays in handset deliveries.

Chairman Li Ka-shing told reporters the two handset suppliers, NEC and Motorola, were late in delivering the handsets.

"One supplier delayed (delivery) for more than two months, then delivered none, which was unexpected. Motorola also delayed a lot. It made some deliveries, but that wasn't enough," said Li.

Three, Hutchison's 3G business, has sold all the handsets they received said Li.

Li accepted that the delays would hurt revenue this year but does not see major problems in the long term.

"Operations in some countries may break even faster than other more competitive markets, but it doesn't matter because we have all the funding and are positive on the prospects," he said.

Even though the production of new NEC handsets had been completed, the delivery is awaiting the outcome of software testing. The arrival of the new handsets is still not yet known. SonyEricsson is said to be bringing out its first 3G handset, the Z1010, on 3's network but is still in its final stage of software configuration. It will not be out until mid-January and it seems extremely unlikely 3 would reach the target of 1million subscribers in both the UK and Italy.

"A one to two month delay might be important to the group's revenue this year, but in the longer term even a six-month delay would not be a big problem to 3G development," he said.

Li said Hutchison was ready to launch 3G in Hong Kong this year, but might give priority of the handsets to Europe first.

Hutchison will also sell US$5 billion of bonds that aims to delay the repayment of debt taken on to pay for its US$16.7 billion investment in 3G mobile phones. It is believed that Hutchison is planning to split the bonds into three tranches with maturities of 7, 10 and 30 years.

 


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