Hutch CEO Says Breakeven Might Come Sooner
By Carlo Longino, Mon Jun 28 20:15:00 GMT 2004

Canning Fok tells an Italian newspaper the carrier might stop losing money sooner than previously thought.

Fok told the Corriere della Sera that 3s EBITDA breakeven point could come sooner than 2005, which his previous statements indicated. EBITDA breakeven is an important point, because it shows the company is viable on a day-to-day basis. Fok says breakeven on the operating level, which he saw in 2006, may come earlier too.

The article, translated and summarized by the AFP news agency, appears to focus primarily on the Italian market, and it's unclear if Fok is saying Hutchison's global 3G operations will break even sooner, or just in Italy, where 3 sees one of its highest ARPUs. Fok added that he sees the 3G business eventually contributing 35-40 percent of Hutchison Whampoa's total group sales, which would be about $5 billion, based on 2003 numbers -- making the carrier much smaller than global giants NTT DoCoMo ($41 billion) or Vodafone ($28.5 billion), or even smaller Euro carriers like mmO2 and KPN.

It seems like every time one story comes along questioning 3, the company pops back a few days later with some sort of response. It's hard to know who to believe, but the vultures circling the company are an ominous sign. The carrier has loudly touted its subscriber adds over the last few months, but the real indication of its performance will be what happens to those numbers once the competition's 3G nets -- which are now on line -- fire up in countries like Italy and the UK.

Hutchison's total investment has been estimated at over $20 billion, so it will be a while, regardless of EBITDA breakeven, before the total investment has paid off for the company and its investors. But if the company can sustain ARPU and subscriber growth, it should be able to hit its financial targets.