3 Group’s EBITDA up 21%; Hutch Asia narrows EBIT loss by 56%

30 Mar 2012

Hong Kong-based conglomerate Hutchison Whampoa has reported its telecoms segment results for the year ended 31 December 2012. Its 3 Group division, operating mobile services in the UK, Italy, Ireland, Austria, Sweden, Denmark and Australia, reported a 16% increase in total revenue to HKD74.288 billion (USD9.567 billion ), and a 21% rise in EBITDA to HKD10.524 billion. 3 Group also achieved a second consecutive year of positive operating profit (EBIT), although it posted a 49% drop in EBIT to HKD1.481 billion, due to lower one-off gains at 3 UK and 3 Italia in 2011. 3 Group’s registered 3G mobile customer base increased by 7% during the year to the end of December, and reached 31.6 million customers at 28 March 2012, Hutchison said in its statement. It added that all 3 Group operations, except Hutchison Telecommunications Australia (HTAL), achieved ‘solid improvements’ in operating results for the year, reflecting ‘rapidly growing’ market shares in the smartphone and mobile broadband segments in all countries of operation, and it expects the division’s earnings contribution to increase in 2012. The improvements in profitability in 2011 in most countries were partly offset by the financial performance of HTAL, which now operates via a joint venture with Vodafone and which addressed network problems by investing CAPEX of around AUD400 million (USD414 million) in 2011. Hutchison also recognised a one-time write-off of HKD1.315 billion as a result of a review process by 3 UK on its fixed asset base, following the near-finalisation of network integration processes. Elsewhere, in February 2012, 3 Austria entered into a binding agreement to acquire a 100% interest of Orange Austria and a subsequent onward sale of the Yesss! brand and certain other assets to Telekom Austria for a net consideration of approximately EUR900 million (USD1.2 billion), subject to regulatory approvals. If the transaction completes, 3 Austria will have a combined base of 2.8 million customers.

Looking specifically at Hutchison’s 3 UK unit, an 18% year-on-year increase in customers drove a 14% increase in revenues to GBP1.79 billion (USD2.85 billion), and, when excluding one-off items, a swing to positive operating profit for the first time, with the British company posting EBIT of GBP30 million in 2011 compared to EBIT losses (excluding one-offs) of GBP15 million the year before. UK EBITDA climbed by 16% to GBP191 million.

As of 31 December 2011, Hutchison Whampoa’s consolidated division Hutchison Asia Telecommunications (HAT) had a mobile customer base of over 34.2 million across Indonesia, Vietnam and Sri Lanka. HAT reported total revenue in 2011 of HKD2.332 billion, compared to restated 2010 sales of HKD2.486 billion, and an EBITDA loss of HKD142 million, although this was narrowed from 2010’s restated EBITDA loss of HKD1.893 billion. HAT’s operating loss also narrowed to HKD1.181 billion in 2011, compared to the HKD2.688 billion it restated for the previous year. During 2011, HAT completed the disposal of its Thailand operation, resulting in a one-off net gain of HKD463 million. It also completed major supplier agreements to enhance its networks in Indonesia and Sri Lanka, recording total CAPEX investment across the three HAT operations of HKD6.5 billion in 2011, up from HKD2.4 billion the previous year. The group booked a one-time impairment charge of HKD2.997 billion in relation to HAT’s assets in Vietnam ‘in view of an ongoing reassessment of the business opportunity in that country.’ In 2012, HAT expects to significantly grow its user base, particularly in Indonesia.

The group’s Hong Kong and Macau unit, Hutchison Telecommunications Hong Kong Holdings (HTHKH), reported its annual results earlier this month, posting revenue of HKD13.4 billion, EBITDA of HKD2.6 billion, EBIT of HKD1.4 billion and HKD1.0 billion in net profit.