Hutchison delays break-even target for 3G

Hutchison Whampoa, the port-to-telecommunications conglomerate controlled by Hong Kong billionaire tycoon Li Ka-shing, said on Thursday first-half earnings doubled after the group booked a hefty exceptional profit from selling part of its port business.

But the company indicated that its 3G operation was not performing well after it delayed a target for the business to break even before interest, tax, depreciation and amortisation from this year to the first half of 2007.

For the first six months of 2006, Hutchison’s net profit jumped 100 per cent to HK$18.8bn, compared with HK$9.42bn a year ago. Revenue rose 14 per cent from HK$109.1bn in 2005 to HK$124.5bn this year.

Hutchison in April completed the sale of a 20 per cent stake in its port arm to Singapore’s PSA for US$4.39bn. The disposal translated into a HK$24.4bn gain to Hutchison’s bottom line.

The Hong Kong company has been forced to sell various assets in recent years to cushion the negative impact of its third generation mobile business on its balance sheet. In the first half, 3G losses before interest and taxes narrowed 40 per cent from HK$20.02bn last year to HK$11.99bn.

Hutchison also had to delay a long-awaited initial public offering for 3 Italia, its Italian mobile unit, because of poor market sentiment and investors’ belief the business did not justify the valuation the company demanded.

People with knowledge of Hutchison’s strategy admitted to the Financial Times in June that the market launch, originally intended to be the Italian market’s largest of last year, has become far less likely to happen, even by the end of the year.

Hutchison had wanted a valuation of about €12bn ($15bn) for 3 Italia and was planning to sell 20-25 per cent of the company. But it acknowledged in March that the market was probably prepared to give the company a valuation of only €9bn.

3 Italia, in common with other telecoms companies, is portraying itself more as a media company that offers products such as live television to its customers. It believes that this entitles it to a higher market valuation.

Shares in Hutchison, which is nearly 50 percent owned by sister property developer Cheung Kong (Holdings), rose 0.2 percent to HK$74.1 in midafternoon trading in Hong Kong. In the first six months of this year, the stock fell 4 per cent.