Hutchison Whampoa Ltd. (13), controlled by billionaire Li Ka-shing, had its credit rating outlook changed to stable from negative by Standard & Poor's because of the company's progress on debt reduction.
Cheung Kong (Holdings) Ltd., Hutchison's parent and Hong Kong's largest builder by market value, and Hutchison unit Cheung Kong Infrastructure Holdings Ltd. (1038) also had their outlooks raised to stable from negative, S&P said in a statement today.
``The outlook revision on the Hutchison Whampoa rating reflects management's commitment to significantly reduce net debt in fiscal 2007 and the stronger performance of the company's third-generation telecommunications operations,'' S&P said.
Li said in March that lower funding costs at 3 Group, the company's European phone unit, and a special dividend may enable Hutchison to cut debt by as much as a third by year-end. The company had HK$152.6 billion ($20 billion) of net debt on Dec. 31.
Hutchison's profit rose 40 percent last year to HK$20.03 billion, partly driven by a smaller loss from high-speed mobile-phone operations because of lower handset subsidies. 3 Group lost HK$19.99 billion before interest and tax in 2006, almost half the loss the year before.
Li said in March he expected 3 Group to break even in 2008 before interest, tax, depreciation and amortization, or EBITDA and after deducting the costs of gaining customers.
``3 Group is expected to meet its previously announced target of positive monthly ebitda after all customer acquisition costs on a sustainable basis during the first half of 2007,'' the ratings company said today.
While recent cuts in U.S. roaming charges and termination rates could put pressure on Hutchison's revenue per user, the company would still be able to post ebitda in the second half this year, S&P said.
Hutchison had HK$117 billion of cash and equivalents, excluding listed equity investments, and short-term debt of HK$22 billion as of Dec. 31, according to S&P.
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