Hutchison Updates on 3G Performance

Hutchison Whampoa, in announcing its interim results for 2005 also gave an update on their 3G mobile network business. The company says that 3 Italy is on target to be earnings before interest expense and finance costs, taxation, depreciation and amortisation ("EBITDA") breakeven, after all customer acquisition costs ("CAC"), on a monthly basis for the month of August this year. This is a significant milestone towards achievement of free cashflow breakeven for the 3 Italy business, and means in effect that revenues from the business are covering both its running operating costs and the cost of acquiring customers at its current high rate of growth.

3 UK and Hutchison Telecommunications Australia are also on target to achieve this significant milestone later this year and early next year, respectively.

Gross customer additions of the 3 Group and HTIL's 3G businesses in the second quarter were approximately 1.9 million, 12% ahead of the first quarter of this year and 70% ahead of the second quarter of 2004. 3 Group's gross revenues for the first half increased by 291% over the first half of 2004 to US$2.2 billion.

The 3 Group as a whole is expected to achieve EBITDA breakeven on a month-by-month basis during the second half of this year.

Looking forward, with the 3 Group's funding requirements declining on an accelerating basis in the second half of this year and disappearing entirely in 2006, the 3 Group businesses should no longer result in an upward pressure on the Group's overall net debt and gearing profile, and are positioned to contribute significant value to the Group.

In order to set an early market benchmark for the growing value of Group's investment in the 3 Group businesses, the Italian operation is taking all steps necessary to be in a position to achieve an initial public offering and listing of shares, market conditions permitting.

With the rapid expansion of its customer base, the 3 Group's average revenue per customer has declined since the annual results announcement in March 2005, an anticipated development as they broaden their customer base. Although ARPU has reduced, gross margin continued to improve due to increased penetration and usage of unique higher margin 3G non-voice services. In addition, management seeks to maintain and grow margins by lowering average customer acquisition costs and focusing on maintaining lower running operating costs and costs to serve.

Finally, 3 Group has adopted a pro-active management approach to deduct inactive start-up phase customers (mostly prepaid) from the customer base. As a result, the 3 Group's net customer additions for the second quarter were lower than net additions reported in the last report. This is expected to be largely a one-time effect attributable to the poorer quality of handsets available to mainly prepaid customers during the early start-up stages of the business. As a result, the revenue, margin and activity profile of our current customer base of over 9.4 million is significantly above industry averages. The rate of net customer additions is expected to resume in the second half and significantly out perform the first quarter and first half achievement."

Posted to the site on 26th August 2005