Regional Wireless Profit Boosted as Price Slump Eases (Update1)
quote.bloomberg.com
By Mathew Carr
Hong Kong, March 2 (Bloomberg) -- Regional Wireless Co., owned by Telstra Corp. and Pacific Century CyberWorks Ltd., may get an earnings boost this year on signs a two-year slump in Hong Kong mobile-call prices is ending, analysts said.
Regional Wireless has 20 percent of Hong Kong's mobile market, ranking it second equal with SmarTone Telecommunications Holdings Ltd. after Hutchison Whampoa Ltd. SmarTone and two smaller rivals raised prices this year.
``It's still a fairly difficult market,'' said Bruce Smith, who helps manage A$2 billion ($1.1 billion), including Telstra shares, at Zurich Scudder Investments Australia in Sydney. Signs that Regional Wireless ``is losing fewer customers,'' bodes well for earnings, even though its outlook remains unclear, he said.
Telstra, 50.1 percent owned by the Australian government, detailed three joint ventures with CyberWorks last month to expand in Asia because increased competition at home has eroded its market share. It bought its Regional Wireless stake from partner CyberWorks and the Hong Kong venture is seeking acquisitions in Asia to expand in the region.
``Recent tariff plans indicate that the cellular price war is easing,'' Bethany Chan, a UBS Warburg analyst, said this week in a research report titled ``Cease-fire''.
SmarTone boosted its monthly charge for up to 200 minutes of calls by more than 50 percent between December and February, she said. New World Telephone Holdings Ltd. and SUNDAY Communications Ltd. also raised prices of some products, Chan said in the report.
Profit Outlook
Merrill Lynch & Co. forecasts Regional Wireless's operating profit will rise 2 percent to $121 million in the year to March 31, 2001 and 1 percent to $122 million in the year afterwards.
Nomura International (Hong Kong) Ltd. now predicts the carrier's operating earnings will rise 13 percent in calendar 2002 to $170 million. In January, it forecast a 4 percent decline.
Average mobile call prices in Hong Kong tumbled about 50 percent since March 1999 after the Hong Kong government ruled that mobile phone users could take their phone numbers with them when they swapped carriers. That encouraged consumers to switch to cheaper competitors and helped drive down average prices, Nomura said.
Telstra stock, which fell 11 percent in February, rose 1 cents to A$6.44. CyberWorks yesterday fell 1.7 percent to HK$4.375.
Regional Wireless ``is actually performing well and year-on- year the earnings before interest and tax are improving,'' Dick Simpson, chairman of the joint venture told reporters. ``We've been consistently reporting that the thing is doing well,'' he said.
In documents released last year, Telstra said Regional Wireless posted operating earnings of $123 million in the year to March 2000. Still, a one-time charge in that year turned net income to a loss of $158 million, from a $178 million profit in the prior year to March 1999.
Regional Wireless, which has operations only in Hong Kong, wants to broaden its reach across Asia and is trying to find suitable acquisitions.
It has been considering buying CyberWorks and London-based Cable & Wireless Plc's jointly held 30 percent stake in Singapore's MobileOne (Asia) Pte Ltd., Simpson said, declining to comment on negotiations. ``There's a lot of people who would wish to talk with us,'' he said. |
