A sluggish 11.2% turnover growth in Hong Kong Telecommunications Ltd’s interim results alarmed analysts and sent the share price down 4 US cents to $2.10. Turnover in the six months to September 30 was $1,720.4m and overshadowed profit growth of 14.7% to $542.4m that matched expectation. The news impacted on Cable & Wireless Plc, which […]
A sluggish 11.2% turnover growth in Hong Kong Telecommunications Ltd’s interim results alarmed analysts and sent the share price down 4 US cents to $2.10. Turnover in the six months to September 30 was $1,720.4m and overshadowed profit growth of 14.7% to $542.4m that matched expectation. The news impacted on Cable & Wireless Plc, which holds 57.5% of Hong Kong Telecom, and sent its share price down 8 pence to 413p. In spite of an expected deceleration because of slow international traffic, analysts have taken the scale of the turnover growth slowdown as a warning sign. It was attributed to lower international call rates, down 10%, and slower than expected Chinese telephone traffic growth at 21%. Analysts had expected Chinese growth to be several points lower than the average of 30% enjoyed in the last few years, but were surprised at the success of the Chinese government’s attempts at cooling the economy and low telephone line penetration, around one phone per 30 people, compared with one line for every two people in Hong Kong. China had appeared a very attractive market but is now proving volatile. Hong Kong Telecom believes that this slowdown in traffic growth is only temporary as China continues to agressively expand its telecommunications network and because the austerity measures will not last forever. China accounts for 49% of Hong Kong Telecom’s international traffic volume and 33% of international traffic revenue. As a whole, international traffic volume grew 18% and revenues were up 9% at $1,066.5m, 62% of Telecom’s total turnover. The mobile business proved very strong in the first half. Revenue from monthly fees and usage charges grew 44%, while equipment sales and rental grew over 50%, but costs growth was limited to 10%. Telecom’s CSL 1010 Digital Mobile Network added 56,000 new customers during the period, recently averaging more than 8,000 new digital customers per month. Taken with its 74,000 analogue customers, Telecom’s 130,000 customers represents a 34% market share. As to the future, Hong Kong Telecom is committed to investing at least $518m a year on infrastructure for the next few years to reinforce the country’s position as the hub of Asian telecommunications. The company is also responding to government moves to encourage competition and has already signed agreements with three potential telephone service licence holders to ensure capacity within its network for them to interconnect next July. It is now negotiating with them on access mechanisms and some technology issues and talks on pricing would follow. Last November the government said that units of Hutchison Whampoa Ltd, Wharf Holdings Ltd and New World Development Co Ltd would be offered fixed-line telecommunications licences when the company’s exclusive franchise expires in 1995.