Please Find Attached the Chairman's Address and the CEO's Address To
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Hutchison Telecommunications (Australia) Limited ABN 15 003 677 227 A member of the Hutchison Telecommunications Group Building A, 207 Pacific Highway St Leonards NSW 2065 Tel: (02) 9964 4646 Fax: (02) 9964 4811 www.hutchison.com.au Companies Announcements Office Australian Securities Exchange Date 19 May 2009 Subject: Addresses to the Annual General Meeting Please find attached the Chairman’s address and the CEO’s address to be made at the Annual General Meeting of the Company this morning. Yours faithfully Louise Sexton Company Secretary Hutchison Telecommunications (Australia) Limited 2009 Annual General Meeting 19 May 2009 Chairman’s Address ¾ I’m pleased to be able to report 2008 was another strong growth year for Hutchison Telecommunications. ¾ Key milestones reached include being EBIT positive in the fourth quarter of 2008 – a 52.8% improvement - and increasing customers by 458,000 to reach a customer base of more than 2 million customers. ¾ 2009 has also been an eventful year so far. We have expanded access to our 3G coverage to areas covering 96% of the Australian population and, of course, we have announced the proposed merger with Vodafone Australia – an exciting, company changing development which the chief executive, Nigel Dews, will run through in more detail shortly. Financials: ¾ Turning back to 2008, the year was once again characterised by the intensive efforts of the Hutchison team to build and provide the latest innovative products and services and value based services for the mass market. ¾ Those efforts led to a solid financial performance which saw an increase in revenue to $1.6 billion. ¾ Increases in revenue and margin resulted in earnings before interest, taxes, depreciation and amortisation (EBITDA) of $200 million - an increase of $86 million and a 42.8% reduction in our loss to $163 million. ¾ In line with previous guidance, capital expenditure of $200.2 million was down 25.2%. ¾ With the support of Hutchison Whampoa, the company repaid $1.1 billion in external funding in December 2008. The $1 billion owed to HWL is repayable on demand and is currently interest free. 2009: ¾ The proposed merger with Vodafone Australia will be a company transforming deal which will see us well placed to become the number two player in the market. With this, all the indications year to date suggest, despite the current economic environment, 2009 will be another solid year. ¾ Now let me hand over to Nigel who will run through some of the operational highlights of 2008 as well as the proposed merger and what’s in store for the company in the year ahead. Hutchison Telecommunications (Australia) Limited 2009 Annual General Meeting 19 May 2009 Chief Executive Officer’s Address As you have already heard, a strong growth year in 2008 has become a very exciting 2009. We have continued to improve our financial position through the delivery of innovative products and services to our 3 customers and we recently announced our proposed merger with Vodafone Australia – a merger which we believe will benefit our customers, strengthen our profitability and put us firmly in line to become the number two player in the Australian mobile market. As the Deputy Chairman has already outlined, we experienced another strong year of customer growth putting us above 2 million for the first time. This growth was underpinned by an increase in the number of mobile broadband subscribers. The growth in mobile broadband subscribers to 526,000 was largely due to our highly competitive data allowances on an expanded range of Mobile Broadband cards and USBs and new internet friendly handsets brought to the market. Consequently non-voice ARPU (average revenue per user) increased 13.4% to $20.76 and overall ARPU remained stable on the previous year and maintained the industry’s leading figure of $66.54. Non-voice mobile services continue to evolve and are changing dramatically the way consumers use their mobiles – in fact 68% of our customer base is billed for a non-voice service each month. The explosion in social networking, messaging and VoIP is having a profound effect on the way people communicate today. 3 recognised this early and has led the market in providing innovative new products to meet this need, particularly for the mass market. In late 2008, our parent company, Hutchison Whampoa, launched INQ Mobile - the world’s most advanced social networking mobile phone company. Exclusive to 3, INQ1 has already won a number of prestigious awards. It fully integrates Facebook, VoIP, email and instant messaging, as well as supporting the use of non-voice services and unlimited use of Facebook. And most importantly at low prices, suitable for the mass market. With over 250,000 visitors to Facebook via the mobile by our customers each week, it is clear that the phenomenon of mobile social networking is set to continue growing. And we plan to capitalise on that. Before I move on to this year’s exciting developments, I want to touch briefly on what was an important initiative associated with our sponsorship of the Australian Test Cricket Team. At the third test in Sydney in January the team and the Sydney Cricket Ground turned pink in aid of the breast cancer charity, the McGrath Foundation. The whole initiative raised $500,000 for the charity and we were proud to be a part of such a worthwhile cause. It was the centerpiece of a fantastic Test Series and a sponsorship which has provided one of the key platforms for our brand. We look forward to continuing to work with the Test team and Cricket Australia in the future. Last month we enhanced the 3 network by giving our customers access to 3G services in areas that cover 96% of the Australian population through expanded roaming access to part of Telstra’s 850MHz network. The new 3G Roaming Zone covers areas outside our current broadband zone and for customers with compatible handsets effectively replaces 2G roaming with a much better 3G roaming experience. In addition we have reduced our roaming rates to make services more affordable for our customers. Now I want to turn to what is arguably the most important development in Hutchison’s 10 year corporate history in Australia as a listed company. On February 9 we announced we had entered into an agreement with Vodafone to merge Vodafone Australia and Hutchison 3G Australia, our subsidiary which delivers 3, a proposal that you approved in early April. Following the ACCC’s release of a Statement of Issues on 1st April, the Commission requested further information from 3 and Vodafone and they expect to announce their decision on 29 May. We have responded to the ACCC's Statement of Issues and their requests for information, in particular expanding on our view that the merger will deliver more competition, a better deal for customers and more investment in the mobile market. The combined business, to be renamed Vodafone Hutchison Australia (VHA), will have 6 million customers, revenue of about $4 billion and a market share of 27%. The merger will also lead to significant cost savings with the net present value of synergies estimated to be worth $2 billion. As we stated in February, the transaction is expected to enhance HTAL’s adjusted earnings per share from the first full year post completion, after synergies and excluding the impact of intangible asset amortisation and one-off costs. The larger scale business will also strengthen our profitability and allow us to invest further in innovative products and services for our growing customer base. The centre of our strategy will remain the delivery of great value calls and innovative products and services for the mass market. Not only do we feel this merger is key for the future growth of Hutchison, it will have a major impact on the sustainability of our position in the broader industry. One of the challenges we face is the need for capital investment if we are to continue to grow our business at the current rate. The merger with Vodafone will enable us to meet this challenge. Notwithstanding the progress we have made in building the 3 business over the past 6 years, competition in the industry remains fragile. This is driven largely by the industry structure, still dominated by Telstra. In 2008, Telstra took 54% of the EBITDA in the mobiles market, and this is a trend that is increasing. We made 4% of the industry EBITDA in the same period. Continuing to grow our share will require ongoing capital investment, particularly for data services, and the merger provides an effective route to make this possible. The impact in terms of improved competition will transform how the existing incumbents operate and we believe the benefits for the consumer that will flow from that will be significant – more choice, greater services and value for money. The other critical development for the industry is the Federal Government’s plan to build a National Broadband Network. While a longer term proposition, this network and in particular fast-tracking investment into the construction of the backhaul component will, from our perspective, provide its own benefits and opportunities. The cost of backhaul, which has been a big issue, will be improved and ultimately this will benefit the consumer. Another initiative by the Federal Government is the drive to improve customer service across the telecommunications industry. At Hutchison we take such responsibilities very seriously and have worked hard to reduce customer service and complaint handling issues. We have focused on a number of initiatives and 3’s customer satisfaction has been improving year-on-year, but we are not resting and are continuing to look for ways to improve further.