3 Group turns profitable after a decade of losses

The mobile phone subsidiary of Hong Kong-based Hutchison Whampoa, 3 Group, has reported its first profitable year since it started operation in Europe and Australia nearly 10 years ago.

The company reported that it achieved an EBIT of HK$2.9 billion (US$372 million) for its mobile business in 2010, excluding its Asian telecoms business, compared with a loss of HK$8.9 billion (US$1.14 billion) in 2009.

Commenting on this turnaround to the Financial Times, Canning Fok, Hutchison Whampoa's managing director, said that during the latter half of 2010 all of its 3 Group subsidiaries, with the exception of 3 Ireland, achieved positive EBIT operating results. "In 2011, 3G will push up our profitability instead of dragging profitability down," he said.

Fok was reported by Reuters as stating that its 3 Group would now continue to contribute profits to the parent company from 2011 onwards.

The company was assisted with its move into positive figures by growing its customer base, and by smartphone users in particular, which grew 13 per cent during 2010 reaching over 29.6 million. The company also rapidly expanded its mobile broadband subscriber base to around six million subscribers, a 32 per cent increase from 2009.

However, two significant events also boosted the company's financial performance.

3 UK recorded a one-time benefit of HK$6 billion (US$770 million) having won the rights to use around 3,000 base stations free of acquisition costs and operating expenses. This helped to offset a provision of HK$3.74 billion (US$480 million) largely concerning the restructuring of 3 UK's network infrastructure. A similar situation also benefited 3 Italia, which recognised HK$1.49 billion (US$191 million) with regard to the assignment of two blocks of 5MHz of 1800MHz spectrum.

While financial analysts marked up Hutchison Whampoa's share price in anticipation of the long-awaited move to profitability, Kalai Pillay, a director at Fitch Ratings in Singapore, was reported by Wireless Federation as commenting that "not losing more money in 3G is good news but this business never really became the cash-earner that they had expected when they first went into it."

For more:
- see this Financial Times article (sub. req.)
- see this Reuters article
- see this ZDNet UK article
- see this Wireless Federation article

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