Company Snapshot: Hutchison Telecom revenue growth’s upward trend will continue due to the higher dependence on smartphones,” he adds.
More data means turtle speed?
Unlimited data, redefined
Hutchison still offers unlimited data packages but it slows down mobile internet speed, thanks to OTA’s “Fair Usage Policy.”
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ccording to Kim Eng analyst Andy Poon, the company is likely to announce a new mobile data service plan in early 2012. “Based on the offerings of their peers, we believe that they are likely to retain their pricing structure, but replace their unlimited data offer with 2GB-5GB data usage, plus a HK$90-100 charge for additional data usage,” he adds. When Fair Usage Policy becomes unfair The “Fair Usage Policy” implemented by the Office of the Telecommunications Authority seems to make the mobile market in Hong Kong a bit complicated, and the subscribers are distressed. Because of the policy, the telcos now have an excuse for providing slower network service to subscribers. Poon notes that Hutchison Telecom announced some revisions to its mobile data packages and that its unlimited data packages now operate on a different definition. Though they retained the pricing structure and unlimited data usage offer, Hutchison would slow down the mobile internet speed of the subscribers whose usages exceed the fair usage data. “While this new definition of ‘unlimited data packages’ eliminates our earlier expectations of price cap removal and higher ARPU growth to HTHK and SMT, our assumption of network cost relief under the new data package remains unchanged,” adds Poon. Heavy data users to drive revenues People who are willing to pay HK$200/month more for additional data usage are heavy data users and they account for
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approximately 20% of HTHK’s 3G postpaid subscribers. Together with new data users who can pay HK$100/month more for data usage, they are expected to drive Hutchison’s revenues for FY12F. According to Poon, based on their 1H11 subscriber figures, the additional revenues from the heavy data users and new data users would be HK$120m for FY12F. “Even though the immediate incremental revenues seem to be uninspiring as it only accounts for 2% of our FY12F revenue estimate, we believe the data
The smartphone domination HSBC analyst Neale Anderson also reckons that the market is rapidly shifting to the smartphone generation, but the exacerbated pace of migration creates greater opportunities, as well as threats. He notes that the primary innovation in wireless telco services over the last several years is the migration from featurephones to smartphones, and the ‘capacity crunch’ is the result of this shift. “We do not see the move from 3G which offers speeds of up to 42Mbps with HSPA+ to LTE which offers speeds of up to 40-70Mbps, depending on the size of the carrier, as a similar step-change,” he adds. Poon notes that HK telcos expect better network traffic and cost controls with the termination of the unlimited data package. They also expect gradual margin improvements with the new data pricing structure. “We estimate 0.8% EBITDA margin improvement for FY12F. In the view of higher ARPU growth and better margin improvement for FY12F, we expect more upward earnings revisions by the market after the 1H12F result,” he concludes.
Additional revenue for new data subscribers who subscribe the new data plan for FY12F
Source: Company data Kim Eng Securities
HTHK’s HK subscribers (million)
Source: Company data Kim Eng Securities
HTHK’s HK subscribers (million) Source: Company data Kim Eng Securities