Hutchison Telecom Delivers Strong Underlying Performance in the First Six Months of 2008
Profit Attributable to Equity Holders from Continuing Operations Surges to HK$1.2 Billion HONG KONG, Aug. 19 /Xinhua-PRNewswire-FirstCall/ — Key highlights: — Total mobile customer base rose 68% year on year to 11.1 million; particularly strong momentum in Indonesia — Turnover increased 22% year on year to HK$11.8 billion — EBITDA was 14.7% up year on year to HK$3.2 billion — Profit attributable to equity holders of the Company from continuing operations surges to HK$1.2 billion on performance , one off gains and favourable exchange rates — Indonesian network rollout accelerated, on track to 6,000 sites by year end — 3G market leadership strengthened in Hong Kong and Israel; launch of iPhone 3G in Hong Kong received unprecedented market response Financial highlights: Six months ended 30 June 2007 2008 Change HK$ HK$ % million million Turnover 9,639 11,760 22% Operating profit 832 2,281 174.2% Profit before taxation 663 2,397 265.1% Profit for the period from continuing operations 341 1,963 — Profit attributable to equity holders of the Company from continuing operations 57 1,165 — Basic earnings per share attributable to equity holders of the Company from continuing operations HK$0.01 HK$0.24 — Note: 2007 Interim results also included a profit from discontinued operations of HK$70,502 million in respect of the disposal of the Group’s indirect interests in CGP Investments (Holdings) Limited
Hutchison Telecommunications International Limited (‘Hutchison Telecom’; ‘the Company’; ‘the Group’; HKEx: 2332; NYSE: HTX) today announced a strong underlying performance for the first six months of 2008. All its major operations reported growth in turnover with particularly strong momentum from Israel, Hong Kong fixed-line and Thailand driving the Group’s total turnover up 22.0% to HK$11.8 billion compared with the same period last year.
The Group’s mobile customer base grew 68% in the past 12 months to 11.1 million, with a significant percentage of the increase comes from Indonesia. Hutchison Telecom continued to register a healthy growth of 3G customers in Israel, Hong Kong and Macau. The total number of 3G customers for the Group had passed two million by the end of June 2008.
The Group’s Earnings Before Interest, Tax, Depreciation and Amortisation (‘EBITDA’) increased 14.7% to HK$3,223 million with growth particularly strong in Israel and Hong Kong. The Group EBITDA margin was 27.4% in the first six months of 2008, a 1.8% decline on the same period last year reflecting higher network expenses from expansion of the Group’s emerging market operations in Indonesia, Vietnam and Sri Lanka.
Operating profit increased to HK$2,281 million for the first six months of 2008 after one-off gains of HK$1,463 million. These arose principally from the Indonesian operations which recognised a HK$731 million gain from the first tranche of tower sale and HK$732 million of compensation from a network supplier. Excluding the one-off gains and some accelerated depreciation charges in Israel and Vietnam, like for like growth in operating profit was 35.0%.
As a result profit attributable to equity holders of the Company from continuing operations surged to HK$1,165 million compared with HK$57 million in the first half of 2007.
On 25 July 2008 the Group completed the acquisition of a 5% stake in its 2G and 3G businesses in Hong Kong and Macau from NEC Corporation taking the Group’s ownership in these businesses from 70.9% to 75.9%. This move reflects the Group’s confidence in the long term value and potential of the Hong Kong and Macau operations.
The Group’s 3G market leader position in Hong Kong brought it the unique opportunity to be the first operator to launch iPhone 3G in Hong Kong. iPhone 3G is a long-anticipated product around the globe and the response in Hong Kong has been unprecedented.
The Indonesian operations also extended its partnership with network suppliers and tower companies during the period. Both are strategic steps to accelerate the network rollout paving for the way to capture the potential in this market. The operations now have over 4,000 sites and are on track to rollout 6,000 sites by the end of the year clearly making it the fourth largest network in Indonesia.
In Vietnam the operations made good progress in switching the network to GSM. It has completed the selection of network vendors and is now working hard to get the network ready for its target launch by the end of 2008.
Dennis Lui, Chief Executive Officer of Hutchison Telecom, said: “In the first six months of 2008 the Group succeeded in delivering a strong underlying performance both operationally and financially. Our mobile operations in Hong Kong and Israel strengthened their 3G market leadership position during the period collectively passing two million 3G customers. In Indonesia we have seen good sales momentum since the launch of the service in the first half of 2007 and are pleased with the progress to accelerate the network rollout. Whilst in Vietnam we have made progress on the conversion to GSM. These steps enhance the Group’s prospect in those markets positioning us favourably to reap the rewards.”
Tim Pennington, Chief Financial Officer of Hutchison Telecom said: “There is evidence of some deterioration in our operating environment as the impact of higher inflation and lower growth affects consumer spending in some markets. We are also mindful of the availability of capital and credit in view of the global situation. However, we are a well capitalised company and during this period would aim to maintain high levels of liquidity to ensure we can meet our operating objectives.”
Operations review Indonesia — Strong user growth to 3.2 million — Turnover was HK$150 million — Accelerated network rollout on track for 6,000 sites
The Group’s Indonesian operation, PT Hutchison CP Telecommunications (‘HCPT’), has seen good sales momentum since its launch in the first half of 2007. During the period HCPT undertook a number of strategic actions to accelerate the network rollout such as the sale and lease back of tower sites announced in March 2008 and the extension of its relationships with vendors and tower companies. Further challenges are expected ahead but HCPT has established itself firmly as the fourth largest network in Indonesia in less than one and a half years so laying a solid foundation to capture the potential of this market.
Supported by this network roll out, HCPT has seen strong customer growth during the reporting period. In the second quarter against a background of intensified competition and tariff reduction the rate of net customer additions for HCPT accelerated to 37.4%, adding 872,000 net additions taking the user base to 3.2 million.
Average revenue per user (‘ARPU’) was IDR12,000 in the second quarter, a reduction from the first quarter due to higher levels of promotional activity in response to increased tariff competition and a reduction in interconnection rates.
Turnover for HCPT in the first half of 2008 was HK$150 million. The comparison with the same period last year is not meaningful as the operation only commenced during that period. Loss before interest, tax, depreciation and amortisation increased to HK$348 million but this is to be expected for an early stage mobile operation as operating costs are usually higher because of network expansion and the resulting growth in operating costs often exceeds that of revenues.
Capex guidance for the Group’s Indonesian operations remains at HK$4.0 billion for the full year 2008. As HCPT accelerates its network rollout it is expected several rollout milestones will be reached in the second half. The target of 6,000 sites will give HCPT significant population coverage in Java and Sumatra, as well as a meaningful presence in Kalimantan and Sulawesi.
Vietnam
Vietnam is one of the most vibrant and high growth mobile markets in the region. The Group believes in its vast potential and is committed to be a successful GSM operator in the market. Following the granting of an investment certificate for a GSM network in March 2008, the operations stopped customer recruitment and existing customers were migrated to a third party network. The customer migration has completed and the GSM network vendor selection concluded. The business is now focusing on reaching its target of service launch at year end.
Hong Kong and Macau
Combined turnover from the Group’s fixed-line and mobile businesses in Hong Kong and Macau was HK$3,751 million, a 6.5% increase year on year. EBITDA was up 11.8% to HK$1,384 million and the EBITDA margin was 36.9%.
Hong Kong and Macau mobile — Customer base increased to 2.6 million — Turnover increased to HK$2.4 billion — EBITDA increased 13.3% to HK$875 million while EBITDA margin was higher at 36.5% — Launch of iPhone 3G in Hong Kong received unprecedented response
The Group’s mobile operations in Hong Kong and Macau continued to steer the market towards 3G adoption and increased mobile data and content usage. Both operations were named the first provider in their respective markets to launch iPhone 3G. In Hong Kong the launch of this long anticipated handset has seen an encouraging response with over 40% of the iPhone 3G users registered for the highest value tariff plan which is resulting in significantly higher levels of data and content usage than for our average customer base.
In the second quarter the operations registered 80,000 net customer additions of which 77,000 were 3G users. This took the combined customer base to 2.6 million. ARPU growth was limited as competition focused on lower value tariff promotions. The sale of iPhone 3G in Hong Kong which started in July will have an impact on the KPI’s in the third quarter onwards.
Turnover was up 3.3% to HK$2.4 billion whilst EBITDA grew 13.3% to HK$875 million due to higher revenue from roaming, content and data usage as well as customer growth. The EBITDA margin, a key focus for the business, increased 3.3% to 36.5%.
Hong Kong fixed-line — Turnover grew 12.8% to HK$1,352 million — EBITDA increased 9% to HK$509 million with a margin of 37.6%
The Group’s fixed-line business in Hong Kong, Hutchison Global Communications Limited (‘HGC’) reported growth in turnover of 12.8% year on year to HK$1,352 million. The growth came from the international and carrier business increased 14.8% following the expanded international network footprint and premium network routings. These together enabled the operations to broaden its customer base and solicit high yield carrier customers. The operations also saw good growth from the corporate and business market which rose 33.0% driven not only by the continued growth in data from the government and finance sectors but also growth in business voice traffic where HGC benefited from business line number porting.
EBITDA grew 9% to HK$509 million. The EBITDA margin was 37.6% compared with 38.9% same period last year, lower due to the relative growth of the international and carrier business that typically carries a lower margin.
HGC has recently announced the inauguration of the fourth cross-border fibre optic system with Mainland China. With this launch HGC boasts what it believes to be the most diversified and highest capacity cross border fibre optic transmission link to Mainland China among any fixed-line operator in Hong Kong, positioning itself favourably to capture the tremendous international communication business potential in and out of Mainland China via Hong Kong.
Israel — Customer base up to 2.9 million — Turnover increased 29.0% to HK$7.0 billion — EBITDA surged 32.4% to HK$2.4 billion
The Group’s Israeli operations, Partner Communications Company Ltd. (‘Partner’) continued to perform strongly by focusing on offering innovative technology, service excellence and a differentiated marketing approach. The orangeTM brand continues to be one of the most widely admired brands in Israel having been awarded the leading telecom brand in Israel for the sixth consecutive year by Globes, an Israeli daily business newspaper. This contributed to drive the strong growth in 3G customers during the first half of 2008 pushing the total customer base up to nearly 2.9 million. Partner also saw continued progress on ARPU which increased to NIS158 in the second quarter.
The increase in the weight of post-paid customers in Partner’s base, higher average minute of use and an increase in content and data revenues together with the beneficial impact of favourable currency rates drove Partner’s turnover to climb 29.0% in the first half to HK$7.0 billion. EBITDA increased to HK$2.4 billion which is 32.4% higher compared with same period last year benefiting from favourable exchange rates and strong growth in customer base and non-voice usage. The EBITDA margin was one percentage point higher at 33.9% as a result of tight operating cost structures and lower customer acquisition costs.
In the period Partner spent HK$453 million to buy back its own shares. The share buyback increased the Group’s interest in Partner from 50.2% previously to 50.9%.
Partner continues to be an integral part of the Group contributing 59.4% of turnover and 73.5% of EBITDA in the first half of 2008
Sri Lanka — Turnover growth suppressed to HK$89 million — EBITDA was down at HK$34 million
In Sri Lanka operational difficulties mounted during the first half. The operations continued to see a very difficult economic time compounded by a tightening security situation which affected the daily life of Sri Lankan people and had a noticeable impact on sales. Against this backdrop the Group’s Sri Lankan operations, Hutchison Telecommunications Lanka (Private) Limited (‘HTLL’) encountered some operational setbacks which are expected to be compounded by much stricter user ID requirements announced recently. As a result HTLL expects to see a substantial downward revision in its customer base. At this stage the revision cannot be fully quantified but HTLL expects to be able to do so in the third quarter.
In the first half of 2008 HTLL recorded only modest revenue growth and a fall in EBITDA as the cost of network expansion was not covered by increased customer acquisition and usage.
Thailand — Customer base increased 40.3% to 1.1 million — Turnover increased 25.5% to HK$621 million — EBITDA at HK$59 million fully covered capex for the first time
The Group’s operations in Thailand Hutchison CAT Wireless Multimedia Limited (‘Hutchison CAT’) showed a significant improvement in its operating results for the first six months of 2008 particularly in customer and turnover growth. The customer base grew 4.3% in second quarter to over 1.1 million. The customer growth supported a 25.5% increase in turnover to HK$621 million. As a result of tight cost control particularly in subscriber acquisition costs, EBITDA improved significantly and exceeded capex by HK$41 million. Hutchison CAT produced its first operating profit following the decision last year to write down the investment.
Ghana
The Group completed the sale of its indirect interests in Ghana in July 2008. The Group is expected to realise an estimated gain of approximately HK$295 million in the second half of 2008 and a net cash inflow of approximately HK$545 million. For the six months ended 30 June 2008 Ghana recorded an operating loss for the period of HK$13 million.
Outlook
Hutchison Telecom reported a good performance in the first half of 2008 and progress in its emerging markets. With the positive actions the Company took in 2007 to address the issues that were most challenging it now has a clear visibility to the opportunities. Looking ahead to the second half of 2008, Indonesia and Vietnam will continue to require attention and resources to accelerate the expansion and rollout of networks. Hutchison Telecom maintains its focus on the cash generating businesses in Hong Kong and Israel to keep the growth momentum and continues to look for further development by leveraging the success it has built in these two markets. Accordingly its capital expenditure guidance is maintained at HK$7.0 billion for 2008.
During the period Hutchison Telecom has evaluated a number of opportunities to expand its operations. In the main it continues to see that price expectations for emerging market telecom assets have not been significantly dampened. There remain opportunities to expand its business but the Company is not optimistic that this will be achieved in the second half of 2008.
Hutchison Telecom continues to be aware of developments in the global economy. There is evidence of some deterioration in the operating environment as the impact of higher inflation and lower growth affects consumer spending. It is also concerned about the availability of capital and credit in view of the global credit crunch. However, the Company is well capitalised and during this period would aim to maintain high levels of liquidity to ensure it can meet its operating objectives.
About Hutchison Telecommunications International Limited
Hutchison Telecommunications International Limited (‘Hutchison Telecom’ or ‘the Group’) is a leading global provider of telecommunications services. The Group currently offers mobile and fixed-line telecommunication services in Hong Kong and Israel, and operates mobile telecommunications services in Macau, Indonesia, Vietnam, Sri Lanka and Thailand. It was the first provider of 3G mobile services in Hong Kong and Israel and operates brands including “3″, “Hutch” and “Orange”.
Hutchison Telecom is a listed company with American Depositary Shares quoted on the New York Stock Exchange under the ticker HTX and shares listed on the Stock Exchange of Hong Kong under the stock code 2332. A subsidiary of the Hong Kong-based Hutchison Whampoa Group, Hutchison Telecom is dedicated to providing superior telecommunications services in dynamic markets. For more information about Hutchison Telecom, see http://www.htil.com/ .
Cautionary Statements
This press release contains forward-looking statements. Statements that are not historical facts, including statements about the beliefs and expectations of Hutchison Telecommunications International Limited (‘the Company’), are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events. Forward-looking statements involve inherent risks, uncertainties and assumptions. The Company cautions that if these risks or uncertainties ever materialise or the assumptions prove incorrect, or if a number of important factors occur or do not occur, the Company’s actual results may differ materially from those expressed or implied in any forward-looking statement. Additional information as to factors that may cause actual results to differ materially from the Company’s forward-looking statements can be found in the Company’s filings with the United States Securities and Exchange Commission.
— Tables to Follow — Unaudited Key Performance Indicators for Second Quarter 2008 Customer Base Q2 2008 Q1 2008 30 June 2008 31 March 2008 Total Postpaid Prepaid Total Postpaid Prepaid Market (’000) (’000) (’000) (’000) (’000) (’000) Hong Kong (incl Macau) 2,595 1,720 875 2,515 1,698 817 Indonesia 3,203 7 3,196 2,331 4 2,327 Israel 2,856 2,135 721 2,823 2,108 715 Sri Lanka (#) 1,291 — 1,291 1,289 — 1,289 Thailand 1,117 418 699 1,071 405 666 Total (#) 11,062 — — 10,029 — — Customer Base(Continued) Q4 2007 Q3 2007 31 December 2007 30 September 2007 Total Postpaid Prepaid Total Postpaid Prepaid Market (’000) (’000) (’000) (’000) (’000) (’000) Hong Kong(incl Macau) 2,427 1,671 756 2,290 1,629 661 Indonesia 2,039 3 2,036 1,627 2 1,625 Israel 2,860 2,068 792 2,796 2,004 792 Sri Lanka (#) 1,141 — 1,141 1,002 — 1,002 Thailand 978 372 606 884 346 538 Total (#) 9,445 — — 8,599 — — Customer Base (Continued) Q2 2007 30 June 2007 Total Postpaid Prepaid Market (’000) (’000) (’000) Hong Kong(incl Macau) 2,239 1,590 649 Indonesia — — — Israel 2,733 1,952 781 Sri Lanka(#) 819 — 819 Thailand 796 317 479 Total (#) 6,587 — — (#) The customer base for Sri Lanka is expected to be revised downward substantially in Q3 2008; see discussion of Sri Lanka on page 3. Notes: (1) A customer is defined as a Postpaid Customer or a Prepaid Customer who has a Subscriber Identity Module (SIM) or Universal Subscriber Identity Module (USIM) that has access to the network for any purpose, including voice, data or video services. (2) Postpaid Customers are defined as those whose mobile telecommunications service usage is paid in arrears upon receipt of the mobile telecommunications operator’s invoice and who have not been temporarily or permanently suspended from service. (3) Prepaid Customers are defined as customers with prepaid SIM cards or prepaid USIM cards that have been activated but not been used up or expired at period end. A new prepaid customer is recognised upon making the first call or registration/activation. (4) All numbers quoted on the basis of the total customer base of the operation irrespective of the Company’s ownership percentage. (5) All numbers quoted as at last day of the quarter. (6) The data for Hong Kong and Israel relate to both 2G and 3G services. (7) The data for Ghana and Vietnam are excluded. ARPU(1) Q2 2008 Q1 2008 30 June 2008 31 March 2008 Market Currency Blended Postpaid Prepaid Blended Postpaid Prepaid Hong Kong (incl Macau) HKD 148 210 24 149 208 24 Indonesia IDR (’000) 12 108 12 14 120 14 Israel NIS 158 — — 155 — — Sri Lanka LKR 163 — 163 193 — 193 Thailand THB 386 784 147 405 808 157 ARPU(1) (Continued) Q4 2007 Q3 2007 31 December 2007 30 September 2007 Market Currency Blended Postpaid Prepaid Blended Postpaid Prepaid Hong Kong (incl Macau) HKD 161 218 28 162 216 29 Indonesia IDR (’000) 15 114 15 — — — Israel NIS 157 — — 165 — — Sri Lanka LKR 242 — 242 287 — 287 Thailand THB 417 813 165 434 815 183 ARPU(1) (Continued) Q2 2007 30 June 2007 Market Currency Blended Postpaid Prepaid Hong Kong (incl Macau) HKD 160 214 27 Indonesia IDR (’000) — — — Israel NIS 157 — — Sri Lanka LKR 311 — 311 Thailand THB 463 843 200 Notes: (1) The monthly Average Revenue Per User (ARPU) is calculated as the total Service Revenues for the month divided by the simple average number of activated customers for the month. The monthly ARPU for the quarter represents the average of the monthly ARPU in the quarter. (2) Service Revenues are defined as the direct recurring service revenues plus roaming revenues. (3) The data for Hong Kong and Israel relate to both 2G and 3G services. (4) The data for Ghana and Vietnam are excluded. MOU (1) Q2 2008 Q1 2008 30 June 2008 31 March 2008 Market Blended Postpaid Prepaid Blended Postpaid Prepaid Hong Kong (incl Macau) 462 672 42 461 655 43 Indonesia 82 117 82 94 104 94 Israel 368 — — 359 — — Sri Lanka 54 — 54 60 — 60 Thailand 607 1,086 319 632 1,134 324 MOU (1) (Continued) Q4 2007 Q3 2007 31 December 2007 30 September 2007 Market Blended Postpaid Prepaid Blended Postpaid Prepaid Hong Kong (incl Macau) 491 680 49 506 691 51 Indonesia 83 59 83 — — — Israel 345 — — 343 — — Sri Lanka 69 — 69 81 — 81 Thailand 643 1,110 347 648 1,088 358 MOU (1) (Continued) Q2 2007 30 June 2007 Market Blended Postpaid Prepaid Hong Kong (incl Macau) 490 673 47 Indonesia — — — Israel 331 — — Sri Lanka 93 — 93 Thailand 638 990 393 Notes: (1) The monthly Minutes of Use (“MOU”) is calculated as the total minutes carried over the network (2G total airtime usage + 3G voice and video usage, but excluding inbound on-net minutes) for the month divided by the simple average number of activated customers for the month. The monthly MOU for the quarter represents the average of the monthly MOU in the quarter. (2) The data for Hong Kong and Israel relate to both 2G and 3G services. (3) The data for Ghana and Vietnam are excluded. Churn (1) Q2 2008 Q1 2008 30 June 2008 31 March 2008 Market Blended Postpaid Prepaid Blended Postpaid Prepaid Hong Kong (incl Macau) 4.0% 1.8% 8.0% 3.5% 1.8% 6.7% Indonesia 15.6% 7.9% 15.6% 17.6% 11.0% 17.6% Israel 1.3% — — 1.7% — — Sri Lanka 3.8% — 3.8% 2.9% — 2.9% Thailand 6.0% 2.9% 7.8% 5.8% 2.7% 7.8% Churn (1) (Continued) Q4 2007 Q3 2007 31 December 2007 30 September 2007 Market Blended Postpaid Prepaid Blended Postpaid Prepaid Hong Kong (incl Macau) 3.3% 1.8% 6.2% 3.9% 1.8% 8.2% Indonesia 17.7% 16.3% 17.7% — — — Israel 1.3% — 1.1% — — — Sri Lanka 2.4% — 2.4% 2.2% — 2.2% Thailand 5.2% 2.8% 6.8% 5.5% 3.4% 6.9% Churn (1) (Continued) Q2 2007 30 June 2007 Market Blended Postpaid Prepaid Hong Kong (incl Macau) 3.7% 1.7% 7.7% Indonesia — — — Israel 1.2% — — Sri Lanka 2.8% — 2.8% Thailand 6.5% 3.9% 8.2% Notes: (1) The monthly churn % is calculated as the average number of disconnections (net of reconnection and internal migration between networks) for the month divided by the simple average number of activated customers for the month. The monthly churn % for the quarter represents the average of the monthly churn rates in the quarter. (2) The data for Hong Kong and Israel relate to both 2G and 3G services. (3) The data for Ghana and Vietnam are excluded. The Board wishes to remind investors that the above key performance indicators are based on the Group’s unaudited internal records. Investors are cautioned not to unduly rely on such data. For enquiries, please contact: Mickey Shiu Corporate Communications or Investor Relations Hutchison Telecom Tel: +852-2128-3107 Mobile: +852-9092-8233 Email: mickeyshiu@htil.com.hk
Hutchison Telecommunications International Limited
CONTACT: Mickey Shiu, +852-2128-3107, or mobile +852-9092-8233,mickeyshiu@htil.com.hk.
Web site: http://www.htil.com/