STOCKWATCH: SmarTone higher on technical rebound/ahead of results

HONG KONG (AFX-ASIA) - SmarTone Telecommunications Holdings Ltd shares were higher on a technical rebound in line with the overall market and ahead of the release of its interim results, analysts said. The company will release its six months to December results this evening. At 10:56 am, SmarTone was up 0.05 hkd at 10.65 on turnover of 251,000 shares. The Hang Seng index was 68.92 points at 13,561.95. Dao Heng Securities' telecommunications analyst, Ben Tam said although the share price is considered cheap based on current valuations, he is still calling a "reduce" on the stock. "I don't see any excitement in the company in the near term. I am still sticking to my reduce recommendation," he said. He is estimating an interim loss of 120 mln hkd, followed by a bigger 240 mln hkd loss for the full year to June results for SmarTone. About 40 mln hkd losses in the first half is expected to come from SmarTone's broadband service division. He said the rollout of the LMDS broadband service fell behind market expectations due to logistics and installation problems, adding that the company has a subscriber base of only 1,000 for the broadband. In addition, he sees overall average revenue per user falling to 204 hkd as new subscribers were mainly low usage PCs and pre-paid subscribers. He is looking at an 18 pct increase in its subscriber base to 1.02 mln at end December and average revenue per user of 418 hkd for dual band subscribers. Tam said the launch of the company's new GPRS and data services is expected to be postponed to the second half due to handset shortages. He said in the first half to December, there was still intense competition. "It was only in the second half that SmarTone had raised its promotional package," he said. Tam does not see any mergers in the telecommunications industry in the near term. He said the rollout of the 3G network may be delayed to 2003-2004, allowing operators using the current network to continue their operations. "There is no hurry for a merger. Even if there are people interested, the smaller companies will ask for a premium at this point," he said.

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