SUNDAY Communications Limited: Interim Results 2004 Announces 38% Rise in First Half Profit to HK$18 Million
13 September 2004 - 10:43PM
PR Newswire (US)
SUNDAY Communications Limited: Interim Results 2004 Announces 38%
Rise in First Half Profit to HK$18 Million (Hong Kong dollar is
translated to United States dollar at a rate of HK$7.8 to US$1.0) *
Net profit up 38% to HK$18 million * 4% rise in post-paid
subscribers * 38% rise in data service revenues * Churn improved by
35% * Focus on 3G future HONG KONG, Sept. 13
/Xinhua-PRNewswire-FirstCall/ -- SUNDAY Communications Limited
(SEHK:0866SEHK:Nasdaq:SEHK:SDAY) today announced its results for
the six months ended 30th June 2004, recording a 38% increase in
net profit to HK$18 million, against net profit of HK$13 million
for the corresponding period of 2003. "Our results reflect the
success of SUNDAY's core strategies to segment the market to
provide specialised services to specific customer demographics, and
to deliver efficiency, quality and innovation in all areas of
operation," said Group Managing Director Bruce Hicks. "We reported
a higher net profit as post-paid subscriber numbers rose, data
services revenue grew strongly and churn improved. The Group
remains confident that its strategy to introduce new multimedia
services based upon the 3G platform with strong support and backing
from Huawei Technologies, when consumer acceptance rises and the
market can offer improved handsets, will fully optimise our future
success." COMPETING IN A CHALLENGING MARKET The improved
profitability came despite a market environment that remained
highly competitive, with voice tariffs falling over the 12 months
to June 2004 by an average of some 30% for post-paid services and
50% for pre-paid services throughout the industry. Accordingly,
revenues for the six months declined to HK$575 million, as mobile
services revenues fell by 10% to HK$521 million compared with the
first six months of 2003, in line with an industry-wide decline in
average revenue per user (ARPU). PROGRESS IN OPERATIONS While
maintaining its competitiveness in the current price-driven market,
SUNDAY laid a strong foundation for an advantageous starting
position in the high value-added market that 3G technology will
usher in early in 2005. In particular, the Group concentrated on
enhancing its subscriber base, with subscribers who are more
inclined to make full use of new technologies and services. SUNDAY
increased its post-paid subscribers by 4% to 432,000 at 30th June
2004 as compared with 30th June 2003, while the pre-paid category
fell by 4% to 227,000, as some competitors launched aggressive
price promotions to attract lower usage pre-paid consumers. Overall
the subscriber base showed a modest increase over the figure 12
months earlier. Despite the competitive environment, SUNDAY's
continued focus on excellent customer service led to a further
improvement in average churn, which has improved by 35% and is down
to 3.6%. The success in attracting and retaining quality
subscribers, and showing a growth in net profit levels, was a
result of the success of the four pillars of the Group's business
strategy: Efficiency. SUNDAY was able to achieve incremental cost
savings in a number of areas. Excluding 3G related expenses, 2G
operating expenses decreased by 21% or HK$66 million, whereas
overall operating expenses decreased by 17% or HK$53 million.
Earnings before interest, tax, amortisation and depreciation
(EBITDA) for the 2G operations increased to HK$161 million, while
total EBITDA decreased by 8% to HK$148 million when 3G expenses of
HK$13 million for the half are included. Quality. SUNDAY's quality
focus in 2003 was on the Group's infrastructure. In 2003, SUNDAY
significantly improved coverage and quality through extensive
network enhancements, including increasing the number of cell sites
and reconfiguring cell sites throughout the territory. This year,
the Group's focus was on further enhancing customer service levels.
To improve the customer experience and in preparation for the
rollout of full-fledged multimedia services, SUNDAY has launched a
programme to renovate its retail shops across Hong Kong. As the
first phase, 25% of SUNDAY's shops were renovated during the first
half of this year. To further enhance customer service, the Group
has initiated more extensive "mystery shopper", "mystery caller"
and focus group exercises to gain an insight into current customer
service levels. SUNDAY has also contracted AC Nielsen to monitor,
on a monthly basis, more than 100 customer service and network
quality attributes. Innovation. Innovation continued to be a
hallmark of SUNDAY's services and marketing. To increase its lead
in location based services (LBS), SUNDAY, in conjunction with China
Mobile, developed a hybrid LBS system involving a Global
Positioning System (GPS), which extends the benefits of LBS beyond
Hong Kong's borders into southern China. This service is
particularly helpful to companies managing fleets of vehicles
travelling between Hong Kong and the Pearl River Delta region, and
represents one of the most advanced LBS services in the global
market. Recognising the growing demand for mobile email services,
SUNDAY introduced an innovative mobile email service "One Bridge",
which allows companies and individuals to synchronise their emails
conveniently between network servers and SUNDAY's mobile PDAs. The
Group strongly believes these types of innovative services not only
support subscriber growth and drive data usage, but serve as an
effective migration tactic to lead specific customer groups to
embrace new offerings in the advanced multimedia future.
Segmentation. The strategy of segmenting the market according to
specific user profiles also contributed to the results. The Group's
four customer segments -- Youth, Corporate, Ethnic and Mass --
expanded in May 2004 with a programme targeting the new "BOBO"
segment, Hong Kong's aspiring class of "bourgeois bohemians". The
striking launch campaign capitalised upon an emerging lifestyle
trend among Hong Kong's affluent, educated middle class, and also
significantly raised the Group's overall profile among consumers.
The results in SUNDAY's Youth segment, which was launched in 2003,
amply demonstrate the Group's success in using segmentation as a
strategy to drive growth in subscriber numbers and data usage.
Since launch in June 2003, in response to targeted product
development and marketing, SUNDAY has grown the Youth segment and
its value considerably. The Group also continued to strengthen its
Corporate and Ethnic segments with enhanced product features and
promotions. Through segmentation, SUNDAY is capturing not just new
subscribers but high value subscribers who are more receptive to
non-voice services, thereby forming the subscriber foundation for
SUNDAY's future multimedia services. STRONG GROWTH IN DATA SERVICES
REVENUE SUNDAY's efforts in the half allowed the Group to post
another strong increase in data services revenues, which rose by
38% over the corresponding period of last year to account for 8% of
total mobile service revenues. This growth is particularly
encouraging as it points to the marked shift towards more data
services that will occur beginning in 2005 as 3G technology garners
mainstream adoption. Increased data usage was stimulated by the
introduction of new and affordable handsets. In a market situation
in which aggressive handset subsidies have again become the
competitive norm, SUNDAY has followed a future-focused strategy
whenever possible to develop handset subsidy promotions for
products which are most likely to encourage an increase in data
usage. FOCUSED ON THE 3G FUTURE "We are confident that our existing
business will remain competitive even under current conditions and
will continue to counter the competition as we prepare for an
aggressive launch of multimedia services using the 3G platform,"
said Mr. Hicks. "We have consistently said we will only launch our
3G service once the technology and the market are ready, and events
have so far proven this is the right strategy." SUNDAY's 3G
strategy is firmly in place and its technological infrastructure
will be ready to launch by end 2004. During the first half, the
Group has built and successfully tested a pilot 3G system, with
solid results. SUNDAY is using advanced 3G technology from Huawei,
which is now supported by a team of over 140 Huawei personnel on
the ground assisting with the rollout of the Group's 3G networks
across Hong Kong. Huawei's acquisition of an 8% stake in SUNDAY
through the open market is further proof of their confidence in
SUNDAY's 3G strategy. The Group is also working smoothly together
with other best-of-class vendors to deploy a number of key
operating systems, including new billing and business intelligence
systems and a complete website revamp. The Group continues to
approach its launch of 3G services from the perspective of
long-term success. Rather than launch in an environment plagued by
handset quality and availability, network availability, call
connection reliability and 2G-3G network interoperability, the
Group has been wise to wait and currently aims to launch in early
2005 when these issues have improved. The Group is confident that
this strategic approach has enabled it to avoid most of the
teething problems common with the introduction of new and complex
technology, and will provide long-term strategic advantage. The
Group is confident that SUNDAY is ready and when the timing is
right, SUNDAY will be successful in the 3G era. "In 3G, timing is
everything. Timing of the launch is critical to the service and
it's also critical to optimising the financial success of 3G," Mr.
Hicks added. "SUNDAY has done an excellent job to truly understand
the Hong Kong market. We haven't launched 3G yet and therefore
haven't suffered the pitfalls of launching too early, before the
market understanding and demand is where it needs to be. The
momentum we're seeing today with existing 3G services is driven
mainly by heavy subsidies and an approach really based upon 2G
services. This will change, but I'm convinced it won't be until
early or mid-2005. That's when SUNDAY 3G will launch, and we'll
launch it in a manner that will generate excitement and attract
take up from consumers across all demographics." About SUNDAY
SUNDAY is an innovative developer and provider of wireless
communications and data services in Hong Kong. SUNDAY began
commercial operations in 1997. The company's core strategy is to
capitalise on the convergence of wireless communications and data
technologies to develop innovative, relevant and value-driven
services and solutions. Today, SUNDAY enhances people's lives by
delivering wireless voice and data applications and services to
meet the lifestyle needs of specific customer segments. Owning a 3G
mobile license, SUNDAY has the increased bandwidth and advanced
technology to meet the rapidly developing market demand for
enhanced multimedia services. This and other information about
SUNDAY can be accessed via http://www.sunday.com/,
http://www.irasia.com/listco/hk/sunday, and http://www.quamnet.com/
. For enquiries, please contact: Media Stella Wong Corporate
Communications Manager Tel: (852) 2113-8251 / 9230-5501 Email:
Investor Relations Email: DATASOURCE: SUNDAY Communications Limited
CONTACT: Media - Stella Wong, Corporate Communications Manager of
SUNDAY Communications Limited, +852-2113-8251 / 9230-5501, , or
Investor Relations -
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