August 12, 2017 2:45 am JST

Citic Telecom's DataMall rollout delayed by nerves over party congress

Macau carrier expects casino recovery to boost fixed-line sales

JOYCE HO, Nikkei staff writer

Macau's fixed-line operator Companhia de Telecomunicacoes de Macau, or CTM, is 99% held by Citic Telecom. (Photo by Kenji Kawase)

HONG KONG -- The telecom unit of Chinese state-owned conglomerate Citic said Friday that the international rollout of its DataMall mobile application has stalled as a partner adopted a wait-and-see attitude ahead of the twice-a-decade Communist Party National Congress set for this fall.

Developed by Citic Telecom International, DataMall lets travelers access local data services through a cross-border data traffic trading platform, eliminating the need to change SIM cards or employ external devices.

The application, currently available only to users on China Mobile's mainland network, recorded 26.3 million Hong Kong dollars ($3.36 million) in sales in the first half, up 61.3% from all of 2016.

Though the telecom company plans to extend coverage to users in Hong Kong, some operators in China's special administrative regions are hesitant to strike deals ahead of the congress, Chief Financial Officer David Chan Tin Wai said.

"I am not sure whether we can successfully launch it in Hong Kong this year," Chan said, revealing that China Mobile's Hong Kong arm is set to become the first partner. "The technology is all ready. But it seems no [operators] really want to make a move before the 19th National Congress."

While looking to partner with Huawei Technologies and Xiaomi for preinstalling DataMall, the company also seeks opportunities in Singapore and Taiwan, Chan said. Taiwanese users hope to enjoy inexpensive data roaming services in Europe, he noted, an offering that potentially can be supported by Citic's takeover of Amsterdam-based Linx Telecommunications, at HK$181.3 million for final consideration.

That acquisition, completed in February, included Linx's 470km submarine fiber network in the Baltic Sea, the company's network operations centers in Moscow and the Estonian capital of Tallinn, as well as a data center in Tallinn that serves as Estonia's largest internet exchange.

China's Belt and Road Initiative has spurred many existing customers to inquire about the services enabled by the Linx deal, said Stephen Ho Wai Chung, CEO of Citic Telecom CPC, a unit that provides enterprise solution services. "We expected its operation to be more profitable than before the acquisition," Ho said, but noted that better results will not surface until next year given the ongoing process of integration.

The Hong Kong-listed Citic Telecom International reported Friday that net profit for the six months ended in June rose 10.9% on the year to HK$454.64 million. Revenue skidded 6.1% to HK$3.59 billion as mobile handset sales declined over 50%. These devices were distributed mainly in Macau, of which 80% were made by Apple and the rest by Samsung Electronics.

Changing consumer behavior sent the company's fixed-line business on a downtrend, despite being a monopoly in Macau. Citic Telecom gained control of Macau's fixed-line services in 2013, when it upped its stake in CTM, short for Companhia de Telecomunicacoes de Macau, to 99% for $1.2 billion. The remaining 1% was held by local government-owned Macau Post.

Vandy Poon Fuk Hei, chief executive of CTM, hopes the ongoing recovery of the city's gaming sector helps reverse the decline.

"Given the signs of pickup in Macau casinos' revenue, and the big projects to be launched in the second half and next year, I believe fixed-line sales will increase [going forward], especially in the enterprise segment," Poon said.

Poon also suggested the Macau government's proposed licensing of the "triple play service" integrating internet, television and telephone services would benefit the company. The company has expedited the upgrade to optical fiber internet services for existing residential and business broadband users to prepare for such integration, he said.

While mainland counterpart China Mobile announced plans to splash out a special dividend for the 20th anniversary of its Hong Kong listing Thursday, Citic Telecom has no plans for a similar arrangement upon its 10th anniversary of going public. Yet the proposed interim dividend, at HK$3 per share, was 5.3% higher than a year ago. Its Hong Kong-listed shares closed 0.84% lower to HK$2.35 on Friday following the release of the results during lunch break, versus a drop of over 2% for the benchmark Hang Seng Index.

Asia300

CITIC Ltd.

Hong Kong

Market(Ticker): HKG(267)
Sector:
Industry:
Distribution Services
Wholesale Distributors
Market cap(USD): 42,320.68M
Shares: 29,090.26M
Asia300

China Mobile Ltd.

Hong Kong

Market(Ticker): HKG(941)
Sector:
Industry:
Communications
Wireless Telecommunications
Market cap(USD): 228,251.35M
Shares: 20,475.48M
Asia300

Samsung Electronics Co., Ltd.

South Korea

Market(Ticker): KRX(005930)
Sector:
Industry:
Electronic Technology
Telecommunications Equipment
Market cap(USD): 297,879M
Shares: 148.18M

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