Hutchison Telecoms (ASX:HTA), the listed entity which owns half of Vodafone Hutchinson Australia (VHA), has reported a net loss of $78.2 million in the first half of 2011.
VHA is a joint venture between Hutchison Telecoms and UK-based Vodafone Group. Today’s half-year results from Hutchison Telecoms, which does not services any customers on its own, only accounts for its 50 per cent stake in VHA.
The significant loss was attributed to both a $15.6 million decrease in interest income after replying shareholder loans in 2010 and the bad publicity surrounding VHA’s network and customer service shortcomings.
Capital expenditure spent on fixing network issues also played a part after VHA committed $1 billion on equipment upgrades.
Company CEO, Nigel Dews, said the upgrade process is ahead of schedule.
Earnings before tax was $140.8 million, a 36.8 per cent drop from the previous corresponding period. Operating margin dropped by 6.6 per cent. Customer service revenue dropped by three per cent to around $1 billion due to a net decline in customer base and a lower average revenue per user (ARPU) at $52.87.
During the first half of 2011, VHA lost 375,000 prepaid customers with a total of 7.2 million remaining.
The telco fared better in the postpaid customer category, losing just 29,000 customers. Around 4.2 million postpaid customers remain with the network. This number may change as postpaid service contracts run out and customers begin to shop around during the busy Christmas season.
Churn rates, which reflect the number of customers leaving the VHA network, remain at just under two per cent, consistent with reports in May. It was above two per cent in February.
Mobile broadband customers grew by 800,000 to 3.2 million.
In May, Dews was confident VHA was on the road to recovery. He reiterated this sentiment at the Hutchison results briefing.
“Despite the improvements now being experienced, the impact of the network and customer service issues in the first half of the financial results will result in a loss for the full year, although we expect to improve profitability in the second half of 2011,” he said.
Dews expected the network investments made by VHA will push it back to profitable growth.
The telco’s aggressive approach to recruiting customers had been blamed for bringing the network to its knees. Dews was certain VHA can maintain a rapid customer growth rate without any further network disruptions.
“Our networks are getting better and stronger all the time,” he said. “What we don’t have we make up for in value.”
As to whether VHA could salvage the brand’s image, Dews believed the telco is making great progress already.
“In terms of re-establishing trust, we are well on our way to doing that,” he said. “What we have to do is respond responsively and quickly to customers along with having no surprises [in terms of network performance] and we’re on our way to achieving that.
“We have to delight our customers with the kind of innovation and offers we put into the market to continually challenge the value that is provided by our plans. I think we are making good moves in that direction.”