Hutchison stays on 3G message
John C. Tanner, Reuters
Hutchison Whampoa talked up its planned 3G mobile business on
Thursday after reporting a decline in first half results and revealing a 1.3
billion euro European drugstore purchase that will be key to its 3G
distribution plans.
Hutchison chief Li Ka-shing said at a press briefing that the company was
"fully committed" to 3G. "The banks support us and businesses in Italy
and the UK are fully funded," Li said.
Hutchison is pressing ahead with efforts to launch its "3"-branded
third-generation mobile service in Britain and Italy in October.
The company said it expects to sign up 1 million customers in each
country by the end of 2003 -- less than its previously stated targets of 1.5
million each.
Hutchison is bucking industry sentiment that has grown so sour that KPN
Telecom on Tuesday said it wanted out of its 15% stake in Hutchison's
UK 3G venture.
When asked why Hutchison was so bullish on 3G despite zero market
confidence and competitors delaying rollouts or in some cases
withdrawing completely, Li said, "In '93, when we started Orange, we had
very few supporters too. If you recall, at the time of the sale of Orange,
the company was not making profits yet, so we always have to look at
the long term."
Li also differed Hutchison's 3G strategy from its European competitors.
"To them, the license is just a piece of paper. Hutchison has gone full
speed with the preparation and buildout of networks and all systems
required to support a full commercial launch of our business."
As for competitors pulling out of the 3G race, Li said, "We are happy to
have less competition. Imagine [Hong Kong cellco] CSL not operating in
Hong Kong for one month."
Chain store buyout provides sales points
Hutchison managing director Canning Fok also talked up the 3G game
plan with reporters.
"I am not a bettor. I am a manager. We have a business plan ... and we
are going to deliver that business plan," said Fok as a he showed off two
3G phones made by NEC of Japan and a third from US-based Motorola.
All three handsets, made exclusively for Hutchison, have built-in
cameras.
"This is not a phone business. This is the smallest video camera, it's the
smallest computer, smallest TV," he said.
Hutchison's unflinching multibillion-dollar commitment to 3G has
bludgeoned its share price, with many investors assigning zero value to
3G in its portfolio of businesses that includes the world's biggest
container port operator as well as retailing and property.
On Thursday, Hutchison said it would buy Dutch-based drug chain
Kruidvat Group, which has 1,900 stores, for 1.3 billion euros ($1.27
billion), and would use a "store-within-stores" concept at its retailers to
sell 3G phones.
Including the Savers chain it bought in 2000 and Kruidvat's 700-store
Superdrug chain, Hutchison will have roughly 1,000 retail outlets in
Britain.
"We will have 1,000 points of distribution, all managed by ourselves," Fok
said.
Fok said Hutchison would sell 3G handsets for roughly HK$15,000
($1,923) in Hong Kong, where it is the dominant 2G operator, and less
than half of that in the United Kingdom, where the phones will be sold
near cost.
Hutchison Whampoa reported a drop in first-half profits to HK$5.95 billion
($762.9 million). Profits for sister property firm Cheung Kong (Holdings)
were also down during the same period. Both companies were hit by
weakness in Hutchison's energy business and a deeper-than-forecast
plunge in its treasury income.
However, Hutchison also unexpectedly booked one-time gains on asset
sales that boosted net earnings. With a market capitalization of $30
billion, Hutchison is Asia's sixth largest public company outside Japan.
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