Hutchison Telecommunications Hong Kong Profit Drops 44 Percent

Hutchison Telecommunications Hong Kong reported an unaudited first-half net profit decline of 44 percent year over year.

The company blamed intense price competition for the mobile segment as well as weaker demand for smartphones that drive data demand.

Mobile service revenue also decreased 11 percent, compared with the first half of 2013, because of increased consumer buying of lower-cost service plans, as well as a decrease in demand for mobile voice services, Hutchison Telecommunications Hong Kong said.

Mobile hardware revenue was HK$2,090 million, an increase of 15 percent for the quarter, year over year. But for the first half of 2014, mobile service revenue dropped by six percent while mobile device revenue declined 13 percent.

But higher operating costs caused EBITDA to decline 35 percent, year over year, while EBIT dropped 53 percent, year over year. That might be attributed to higher costs related to the new Long Term Evolution network.

That revenue loss was partially offset by higher profits in the enterprise and business segments of the fixed-line business.

As of June 30, 2014, the company had 3.6 million mobile customers in Hong Kong and Macau, 200,000 users less than the company had for the same period of 2013.

Blended postpaid account average revenue per user dropped 5.3 percent to HK$197 from 2013 levels of HK$208.

Hutchison Telecom chief executive officer and group managing director, Peter Wong, said the outlook for the second half remains challenging but the company expects the performance of the mobile business to improve gradually in the second half.

In part, that expectation is based on a reduction of contestants in the mobile service market from five providers to four. But competition and the costs of LTE network construction are pinching revenue and profit for China’s mobile operators, throughout the country, as well.

Though observers are used to weakening profits and revenue in the Western European markets, even established markets in fast-growing Asia are not exempt from profit or revenue pressures caused by competition, and exacerbated by the costs of creating and operating new Long Term Evolution 4G networks.