Hutch delays breakeven for 3

James Middleton

August 24, 2006

2 Min Read
Hutch delays breakeven for 3

Hong Kong conglomerate Hutchison Whampoa hinted at performance problems Thursday, when it delayed the break even target for its 3G operations from this year to the first half of 2007.

At the company’s first half financials announcement, billionaire Li Ka-shing said he expects that expects that the 3 Group will continue to report improved financial performance and narrowing losses in the second half. “However, management does not expect the 3 Group as a whole to achieve breakeven at the level of EBITDA after deducting all customer acquisition costs (CACs) for the full year this year.

“It is now expected that the 3 Group will achieve positive monthly EBITDA after deducting all CACs on a sustainable basis during the first half of 2007 and positive monthly EBIT on a sustainable basis during the first half of 2008.”

During the first six months of the year, revenues for the 3 Group increased 36 per cent on 2005 to HK$23.5bn (£1.6bn), while losses shrank 40 per cent from HK$20bn in 2005 to HK$11.9bn.

With the exception of 3 Italia, growth in the 3G operation’s customer base was mostly in the higher value postpaid segment. Although the cost of acquiring postpaid customers is typically higher than for prepaid customers, 3’s average cost of acquiring a customer declined from Eur293 (£198) as of the end of 2005 to Eur262 in June.

Average revenues per user (ARPU) increased for the 3 Group overall from Eur42.20 at the end of last year to Eur44.66 at the end of June, driven mostly by the postpaid customer base.

Thomas Husson, analyst with Jupiter Research commented: “On the prepaid segment, the company even acknowledged that it will rather try to increase ARPU than market share. A proof for this is the decrease of Subscriber Acquisition Costs.It means less phone subsidies and less commercial aggressiveness.

“Does that mean the main telcos are capturing a larger share of the 3G market? Yes, indeed but not to the extent many expected. Vodafone recently announced it will not continue to subsidise massively 3G for prepaid users.”

About the Author(s)

James Middleton

James Middleton is managing editor of | Follow him @telecomsjames

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