Hutchison says 3G to break even next year
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Hutchison Whampoa, the conglomerate controlled by Hong Kong tycoon Li Ka-shing, on Thursday reported a 45 per cent reduction in losses at its 3G telecommunications business and predicted the unit would break even next year.
The group said 3G losses narrowed to $2.6bn last year. The 3G unit, which has anchor operations in Italy and the UK, lost more than $4.6bn in 2004 and 2005. “I don’t have to put one more cent into 3G,” said Mr Li, adding that the company’s networks in Italy, Australia and Hong Kong had achieved internal break-even targets last year.
“The only one lagging is the UK and we are forecasting it to do well very soon.”
Hutchison said its 3G business was on track to post positive earnings before interest and tax in 2008. Over recent years 3G has been a millstone for Hutchison, overshadowing strong growth and profitability at its port operations and at Husky Energy, its Canadian oil and gas company.
“I keep on saying we are a conglomerate. We are not a telecoms company,” said Canning Fok, Hutchison’s managing director.
The 3G unit’s problems have also dogged Mr Li, who is popularly known in Hong Kong as “Superman” for his investing prowess.
Hutchison famously booked a $15bn net gain from its 1999 sale of Orange, the UK mobile company, to Mannesmann, and has since ploughed $25bn into 3G.
While Mr Li’s knack for well-timed asset disposals and spin-offs has not deserted him, Hutchison’s subsequent deals have been seen as calculated attempts to offset losses from 3G – something the company has consistently rejected.
Last year, Hutchison booked a one-off gain on disposals of $3bn, arising principally from the sale of a 20 per cent interest in its global port operations to the Port of Singapore Authority.
This year, Hutchison stands to receive as much as $6.7bn from Hutchison Telecommunication International’s sale of Hutchison Essar, India’s fourth largest mobile operator, to Vodafone for $11.1bn. In his first public comments on the deal, Mr Li defended it as good value for both groups. “[Vodafone] is in the telecoms business and very shrewd. We sold for a good price but India’s potential is huge.”
The lower 3G losses and the PSA transaction helped Hutchison report a 40 per cent increase in net profit to $2.6bn.
The company’s full-year dividend was unchanged at 22 cents. Mr Li has said dividends will not increase until 3G is profitable.
Mr Li’s flagship, Cheung Kong Holdings, which controls 49 per cent of Hutchison Whampoa, reported a 29 per cent increase in net profit to $2.3bn.
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