[ET Net News Agency, 1 August 2019] HSBC Global Research lowered its target price for
Hutchison Telecom (00215) to HK$2.08 from HK$2.12 and maintained its "hold" rating.
The research house said Hutch's results suggest a tough market in the first half.
Service revenues fell 3%, despite a 17% increase in roaming revenues, as Hutch tariffs to
Europe and Asia continue to see high demand from consumers. The popularity of the roaming
packages is likely a factor in the reduction in the postpaid churn rate to 1.1% from 1.4%
in 2H 2018.
The service revenue decline suggests the aggressive prices offered by China Mobile
(00941) are having an effect - HSBC sees no indication that pricing dynamics will improve.
Hutch continues to cut costs (particularly in distribution) to help offset the impact on
margins.
HSBC reduced its 2019/20 revenue estimates by 25%/29% to reflect this. But it raises its
2019/20 EBITDA estimates by 34%/21% to reflect the IFRS-16 driven change in lease
accounting. (KL)