Hutchison Telecom HK setting sights on a brighter future

In line with ordinary 1H14 results.

Hutchison Telecom HK (HTHK) has reported net income of HK$323mn (-43.5% y/y, -6.1% h/h), slightly lower than Barclays'view of HK$329mn, while EBITDA of HK$1,203mn was also a touch lower than its expectation of HK$1,245mn, mainly driven by the lower than expected equipment margin.

According to a research note from Barclays, however, expectations into the future around mobile are much brighter than what 1H trends indicate given HKT’s acquisition of CSL driving intra market consolidation.

HTHK highlighted an increasingly more rational market and that recent price recovery trends are expected to continue.

Management also highlighted the anticipated launch of new and exciting smart devices to bring growth back to an otherwise stagnant mobile market.

Here's more from Barclays:

The 4G subscriber count was indicated as growing more than 15% h/h, specific numbers were not disclosed though.

Management expects subscribers’ migration to 4G to accelerate in 2H14 as they believe the upcoming iPhone 6 could drive handset upgrades and hence contract renewals.

4G data usage was indicated at c2.5GB per month, which compares with 3G monthly usage of 1GB.

Overall mobile subscriber count was lower by 5.2% y/y or 4.9% q/q to 3,588k, which was mainly driven by the withdrawal of low tier price plan (i.e. HK$68 3G plan) and thus the loss of low tier subscribers.

Management explained the move as deliberate and highlighted an increasing focus on mid to high end subscribers, given the higher data usage among that group.

Management expects to win back its 3G spectrum in the upcoming 3G spectrum re-auction (due 4Q14), and do not see the auction price to deviate materially from the reserve price given better spectrum availability after HKT/CSL merger