LI, Tao @ Hong Kong

A woman talks on her mobile phone. City Telecom said its gain offsets a 10.4 percent year-on-year loss in its international telecommunications service business. Ted Aljibe / AFP

Company more than doubles its dividend to HK$0.15 per share

City Telecom (HK) Limited raised its interim dividend by 131 percent after posting a 44 percent gain in net profit for the first half of its fiscal year, driven by strong growth in its broadband business.

Net profit for the six months ended February 28, 2011, stood at HK$167.6 million or HK$0.219 a share, compared with the HK$116.4 million or HK$0.173 per share it gained during the corresponding period a year earlier.

The telecom operator declared an interim dividend of HK$0.15 per share, up 131 percent from HK$0.065 cents per share dividend recommended for the same period last year.

Group turnover increased by 5.1 percent year-on-year to HK$825.9 million over the first half, thanks to an increase in the fixed telecommunications network service (FTNS), which rose 7.6 percent to HK$727.2 million in the first half, Chairman Ricky Wong told a media briefing in Hong Kong on Wednesday.

Wong added that the gain has offset City Telecom’s 10.4 percent year-on-year loss in international telecommunications service business (IDD), which shrank to HK$98.7 million over the period.

Driving at profitability, City Telecom lifted the price of its symmetric 100Mbps standalone broadband service by 70.7 percent to HK$169 per month in September from the previous discounted HK$99 per month charge, but it still managed to achieve 25,000 net additions to its subscription base.

Wong said the net addition represents a dominant 68 percent of total market growth over the period in Hong Kong. He added that City Telecom has also expanded its fiber homes pass by 63,000 to 1.83 million, among which about 1 million is now 1Gbps enabled.

The company also wants to enter into the free TV market and has submitted an application for a license to the city’s regulator, which would be able to take advantage of its existing fiber network. Wong said the company is not yet clear when it will be granted the license.

Kenny Tang, executive director with Redford Securities, said City Telecom’s remarkable profit gain in the first half reflected the characteristics of the telecommunications industry, which involves a huge initial investment at the beginning while returns gradually become stable due to the effect of scale economies.

“But being involved in the TV business is both costly and risky. City Telecom should be careful with its capital expenditure to keep its financial status sound,” said Tang.

Wong admits that as free TV business is a long-term investment, it is not likely to achieve considerable financial returns to the group. He said that as fixed capital expenditure is likely to stay low in the next two years, he does not expect the TV business to become a burden to City Telecom’s financial performance.

Shares of City Telecom rose HK$0.08 or 1.38 percent to close at HK$5.88 in the city on Wednesday.

China Daily

(HK Edition 04/21/2011 page3)

http://www.chinadaily.com.cn/hkedition/2011-04/21/content_12365537.htm