Hutchison issues red alert about Vodafone's results this year
Hutchison Telecommunications Australia, which has a 50 per cent stake in Vodafone Hutchison Australia (VHA), said the wireless carrier had made inroads into stabilising its customer base and financial performance.
However, Hutchison chairman Canning Fok said he still expected Vodafone's balance sheet to be in the red this year.
BusinessDay revealed on Thursday that Vodafone Australia's parents were forced to pay $173 million into a lending facility after the Australian venture came close to breaching covenants on a $3 billion loan this year.
Vodafone's talks with its bankers continue as its latest accounts show that VHA recorded an $899 million loss for the previous calendar year. This had widened from a loss of $420 million in 2011.
"Although continuing losses are anticipated in 2013, HTAL [Hutchison Telecom Australia] expects improvements in VHA's performance through the year and into 2014," Mr Fok told investors at the telco's annual meeting.
VHA is a joint venture between Vodafone and Hutchison Telecom, which is owned by the richest man in Asia, Li Ka-shing. Hutchison lost $408.8 million last year but earned $19 million in interest from its loans to Vodafone Australia.
Mr Fok reiterated his support for the loss-making venture at the company's annual meeting on Thursday. "It is important to remind you that Hutchison, together with its joint shareholder, Vodafone, continues to support VHA and we have fully endorsed the strategy to turn VHA's business around," he said.
Vodafone Australia chief executive Bill Morrow, who has a reputation for turning around distressed businesses, is fighting a battle to win back disgruntled customers owing to the well-documented network failure issues.
Mr Fok said regaining this trust was the key focus of VHA and continued investment was critical.
Vodafone is due to launch its 4G network next month.
Frequently Asked Questions about this Article…
Hutchison (which owns 50% of Vodafone Hutchison Australia) warned that Vodafone Australia is likely to post further losses. Hutchison chairman Canning Fok said he expected Vodafone's balance sheet to remain in the red this year, although the company expects improvements through the year and into 2014.
Vodafone Hutchison Australia recorded an $899 million loss for the previous calendar year, nearly $900 million, a widening from a $420 million loss in 2011.
According to the article, Vodafone Australia's parents were forced to pay $173 million into a lending facility after the Australian venture came close to breaching covenants on a $3 billion loan earlier in the year, prompting the cash injection to protect the financing.
Hutchison has reiterated its support for VHA and has fully endorsed the strategy to turn the business around. Hutchison itself reported a $408.8 million loss last year but earned $19 million in interest from loans it made to Vodafone Australia.
Vodafone Australia’s chief executive, Bill Morrow, who has a reputation for turning around distressed businesses, is focused on winning back disgruntled customers following well-documented network failure issues; regaining customer trust and continued investment are cited as key priorities.
The article highlights ongoing operating losses, the risk of breaching loan covenants (which led to a parental cash injection), and reputational damage from network failures. It also notes that continued investment is critical to regaining customer trust.
VHA is a joint venture between Vodafone and Hutchison Telecom, meaning the parent companies share ownership and responsibility. The article notes Hutchison Telecom is owned by Li Ka-shing and that both parents have provided financial support to keep the venture operating.
The article states that Vodafone is due to launch its 4G network next month, a move referenced as part of the company's efforts to improve performance and service.
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