Hutchison exceeds forecasts for profitability & growth

28 February 2000

Hutchison Telecommunications (Australia) Limited (Hutchison) has announced a full year profit of $2.3 million, which is a $1.3 million improvement on the forecast made in its 1999 Prospectus.

Hutchison Managing Director, Mr Barry Roberts-Thomson said: "We have met our targets for profitability, growth and operations while making the significant transition from being a network reseller to a network owner.

"I have enormous regard for the efforts of management and staff who have met the challenge of building a wirefree network and launching the first of its services, while also growing the existing business in an increasingly complex and competitive climate."

Total revenue for 1999 was $329.6 million, a result slightly above the forecast of $324.5 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) of $12.4 million was also on target.

"This strong result was due to higher-than-forecast growth in our Mobile Resale business, which contributed 86% of revenue during the year," Mr Roberts-Thomson said.

At 31 December, Hutchison had 354,769 subscribers, of which 250,894 were Mobile Resale subscribers. Mobile Resale subscribers grew by 31% during the year, an improvement on the 27% growth forecast in the Prospectus.

"Importantly, this growth was achieved whilst maintaining a high annual average revenue per user (ARPU) result of $1,009," Mr Roberts-Thomson said. "While 1999's performance was marked by our ability to balance growth with subscriber value, we do expect that annual ARPU for the resale business will decline as competition intensifies over the coming years. For this reason, we are committed to owning and developing our own wirefree networks, where we have greater flexibility to innovate and build subscriber value."

Hutchison's Paging and Messaging revenue and subscribers declined 5% and 7% respectively. This was in line with the Company's expectations for this mature business. Hutchison estimates it holds over 30% of the paging and messaging market. In 1999, Paging and Messaging generated 12% of revenue.

Other revenue was derived from Long Distance and Internet services and the initial sales of Hutchison's wirefree local telephony service, Orange One.

Long Distance and Internet are value added services, which enable Hutchison to provide customers with a complete communications solution integrated on one bill. These services contributed around 2% of total revenue in 1999, while their subscriber numbers more than doubled. This growth was primarily in Long Distance where competitive tariffing and the expansion of services increased sales.

In December, Hutchison commenced sales of its wireless local telephony service, Orange One. This service uses the new CDMA network, which Hutchison is constructing in parts of New South Wales and Victoria, including Sydney and Melbourne.

Construction of the CDMA network is on track to support availability of the complete Orange One service by mid year. In a world first, this service will integrate local and mobile telephony on one handset, ensuring customers need only one phone for all their voice communications.

"Feedback from initial sales of Orange One has been very encouraging," Mr Roberts-Thomson said. "Customers like the product and understand its application as an additional phone for their home or business.

"While it is still early days, we are seeing very positive results in the number of sales arising from presentations to customers and also in the quantity of multiple handset sales. This is particularly noteworthy given the fact we are only selling the local telephony service, without the added feature of mobility.

"The period of initial sales is providing valuable feedback on our marketing, sales and delivery processes. We will continue to refine and improve our service as we progress towards the mid year target for full service availability."

As a percentage of revenue, operating expenditure from Huchison's existing business remained in line with the Prospectus forecast of approximately 96%.

The CDMA project was the major item of capital expenditure in 1999. Total capital expenditure for the year was $142.1 million, of which $133.1 million was investment in the CDMA network. Total capital expenditure was less than the forecast $158.5 million in 1999.

The CDMA project is fully funded by a mix of project financing and equity raised during the Initial Public Offer in 1999.

"1999 has been a year of great achievement and progress. We are now well positioned to realise our plans to become a significant provider of innovative wirefree services, with the launch of our CDMA network on track for mid 2000," Mr Roberts-Thomson said.

 

Key Statistics for Hutchison's existing business at 31 December 1999

	1999 Full Year Result	1999 Prospectus Forecast
Subscriber Numbers
Mobile Resale	250,894	N/A
Paging and Messaging	83,538	N/A
Other (incl. Long Distance & Internet)	20,337	N/A
Total Subscribers	354,769	344,000
Financial Data $ million
Mobile Resale Revenue	284.9	280.2
Paging and Messaging	39.5	40.0
Other Revenue	5.2	4.3
Total Revenue	329.6	324.5
Operating Expenses	(317.2)	(312.2)
EBITDA	12.4	12.3
EBIT	5.9	6.9
NPAT	9.0	8.0
Abnormal Items	(6.7)1	(7.0)
NPAT & Abnormal Items	2.3	1.0

Orange products and services are provided in Australia by Hutchison Telecommunications (Australia) Limited.

¹ Costs associated with the launch of the Orange brand were treated as an abnormal item

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For more information, please contact:

Press Contact: Orange Melina Reed Tel: (02) 9964 4874 or (413) 622 435