Hutchison Telecom's net profit surged 20% to HKD1.2b

All thanks to its robust hadsets sales.

HTHK’s FY12 net profit rose 20% YoY to HKD1.2b, largely inline with our estimate and mainly supported by strong handset sales, which surged 40% YoY and accounted for 44% of total revenues. 

Maybank adds, management highlighted the efficiency of the internal mobile subscriber upgrade strategy in lowering external customer acquisition costs.

Here's more:

They also announced a successful bid for 2.5/2.6 GHz band spectrum by its JV company with HKT, with a spectrum utilisation fee of HKD290m and 15 years of usage rights.

With a data tsunami anticipated especially now that 4G LTE service has been launched, management expects the new spectrum will improve mobile network capacity.

They expects mobile capex to be manageable in FY13F because most of the 4G LTE network upgrades have been completed. We maintain our view that HTHK's mass-market focus is unlikely to be an advantage in the 4G market. We keep our HOLD rating and earnings estimates unchanged.

4G smartphone users to be more sensitive to network quality. While we expect 4G smartphones to have more powerful features, we also anticipate that mobile apps will become more data-consuming.

Since the HK telcos are moving toward to a tiered data pricing structure with higher service charges to the high mobile data-usage subscribers, we believe these subscribers will be more sensitive to network speed and coverage, especially they are paying more for data.

Therefore, we maintain our view that the JV-4G LTE business model is unlikely to offer HTHK a competitive advantage in delivering better service quality and acquiring high-end smartphone users. 

Good cost control. We expect HTHK to be able to manage the capex and opex through internal mobile subscriber upgrades and its JV with HKT. Although
stronger-than-expected data growth may trigger higher network expenses, we expect HTHK to be able to manage these owing to its mass-market business model.