Hutchison Telecom (0215.HK) – Dialing up value in a discounted recovery call with decent yield
Strong cashflow, defensive yield, and organic growth initiatives position Hutchison Telecom for stable returns amid a recovering Hong Kong market
Hutchison Telecommunications Hong Kong (0215.HK, “Hutchison Telecom”) offers a rare combination in today's volatile market: a deeply discounted valuation, a high dividend yield, and growing momentum in its roaming and 5G services. With a solid net cash position covering 67% of its market cap, minimal capex requirements, and improving profitability driven by tourism recovery and cost efficiencies, Hutchison Telecom stands out as a defensive income opportunity with modest growth upside. While the Company operates in a competitive landscape dominated by larger peers, its disciplined capital management, focus on organic growth projects, and exposure to resurgent travel trends position it to deliver stable returns in the coming years.
Mobile operators bear significant upfront costs building cell towers to enhance network coverage, and later recoup investments from selling data plans and other services to customers. After many years of heavy investment, Hutchison Telecom has claimed a decent slice of the Hong Kong market. Hutchison Telecom, with a market cap of HKD 4.77 billion (USD 615 million), is a subsidiary of CK Hutchison (0001.HK; “CKH”) and holds a 17% share of the Hong Kong mobile network market. It operates under the brand “3 Hong Kong”. Locally it’s the second largest telecom operator by customers behind China Mobile and provides mobile and fixed-line services.
Taking in the positives amid a lackluster performance
In FY24A, Hutchison Telecom’s total revenue decreased by 2% yoy to HKD 4.78 billion (USD 616 million). Local service revenues, which accounted for 60% of total revenues, declined slightly by 4.3% yoy to HKD 2.88 billion (USD 371 million), impacted by competitive pressures from the value-driven segment.
On a positive note, within just a year, the proportion of Hutchison Telecom’s subscribers on 5G packages also grew from 46% to 54% due to extensive promotion of its 5G subscription services, while the monthly churn rate remained steady at 1%. Hutchison Telecom’s customer base also increased by 17% yoy to 4.64 million, along with a 30% yoy increase in roaming revenues to HKD 684 million (USD 88 million), which accounted for 14% of total revenues. This growth was largely driven by a 36% yoy increase in its total outbound roaming revenue (Hong Kongers going abroad and buying data packages from Hutchison Telecom), signaling a return to pre-pandemic levels.