2019
Annual Report

2019
Annual Report

Ownership Structure

HTAL owns 50% of VHA. Vodafone Group Plc owns the remaining 50%. CK Hutchison Holdings Limited is the majority shareholder of HTAL, with an 87.87% stake#.

VHA Key Operational
Highlights in 2019

Financial Summary

VHA recorded 6.9 per cent YoY EBITDA growth in 2019, despite uncertainty caused by the ACCC’s decision to oppose the VHA-TPG merger and the Huawei ban. In 2020, VHA looks forward to implementing the merger, subject to further approvals, following the Federal Court ruling to allow the merger, and rolling out its 5G network.

VHA financial and operating metrics

2019 2018 YoY change %
The items below represent the 50% share of VHA attributable to HTAL
Total revenue ($m) 1,761.7 1,813.2 (2.8%)
Service revenue ($m)1 1,197.1 1,227.0 (2.4%)
EBITDA ($m)2 589.4 551.1 6.9%
Net EBITDA adjustment AASB 163 71.0
Net EBITDA without AASB 16 518.4 551.1 (5.9%)
Share of net loss of VHA ($m)4 (159.1) (5.0) 3,082.0%
Net loss adjustment AASB 163 24.0
Net loss without AASB 16 (135.1) (5.0) 2,602.0%
2019 2018 YoY change %
The following items represent 100% of VHA’s operating metrics
Postpaid customers (’000) 3,416 3,454 (1.1%)
Prepaid customers (’000) 2,018 2,209 (8.6%)
VHA customers subtotal (’000) 5,434 5,663 (4.0%)
MVNO customers (’000) 310 356 (12.9%)
Total network customers (’000) 5,744 6,019 (4.6%)
Fixed Customers (‘000) 114 33 245.5%
ARPU ($)5 33.35 35.05 (4.9%)
Notes:
  1. Reclassification of $5.8 million content costs into net service revenue. The December 2018 figures reclassed for comparative was $8.1 million.
  2. EBITDA is defined as earnings before net finance costs, tax and depreciation and amortisation.
  3. AASB 16 Leases became effective for the Group on 1 January 2019. AASB 16 Leases establishes principles for the recognition and measurement of leasing arrangements. EBITDA for the year ended 31 December 2019 has increased as adopted AASB 16 Leases are no longer accounted for as operating expenses. Net losses for the year ended 31 December 2019 reflects the increase in EBITDA offset by depreciation expense of the right-of-use assets and interest expense on lease liabilities relating to adopted AASB 16 Leases.
  4. Reconciliation for the Share of net loss of VHA is set out on pages 31 to 33.
  5. ARPU represents a rolling 12 month average net service revenue per user per month at the end of the period excluding MVNOs and including Kogan and Lebara. Updated ARPU reflects the change in basis of calculation as a result of the reclassification of content costs into service revenue, and the exclusion of M2M IOT revenue. The prior year comparative has also been updated based on this change.

Read footnotes

Chairman's Message

With continued support from
CK Hutchison Holdings Limited and its joint shareholder Vodafone Group Plc, VHA achieved a steady EBITDA result.

Fok Kin Ning, Canning Chairman

Read the Chairman's Message In Full

Board of Directors

  • Fok Kin Ning, Canning

    Chairman BA, DFM, FCA (ANZ)

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    Fok Kin Ning, Canning, aged 68, has been a Director since February 1999. Mr Fok has been an executive director and group co-managing director of CK Hutchison Holdings Limited (“CKHH”) since 2015. He has been a director of Cheung Kong (Holdings) Limited and Hutchison Whampoa Limited (“HWL”) since 1985 and 1984 respectively, both of which became wholly owned subsidiaries of CKHH in 2015. He has been chairman and a non-executive director of Hutchison Telecommunications Hong Kong Holdings Limited (“HTHKH”) since 2009 and of Hutchison Port Holdings Management Pte. Limited (“HPHM”) as the trustee-manager of Hutchison Port Holdings Trust (“HPH Trust”) since 2011, an executive director since 1985 and chairman since 2005 of Power Assets Holdings Limited (“Power Assets”), chairman and an executive director of HK Electric Investments Manager Limited (“HKEIML”) as the trustee-manager of HK Electric Investments (“HKEI”) and of HK Electric Investments Limited (“HKEIL”) since 2013, co-chairman of Husky Energy Inc. (“Husky Energy”) since 2000, and an executive director and deputy chairman of CK Infrastructure Holdings Limited (“CKI”) since 1997. The aforementioned companies are either the ultimate holding company of HTAL, or subsidiaries or associated companies of CKHH of which Mr Fok oversees the management. Mr Fok has also been a director of VHA since 2001. He holds a Bachelor of Arts degree and a Diploma in Financial Management, and is a Fellow of Chartered Accountants Australia and New Zealand.

  • Barry Roberts-Thomson

    Deputy Chairman

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    Barry Roberts-Thomson, aged 70 has been a Director since February 1989 and was Managing Director of HTAL from its inception in 1989 until September 2001. In his capacity as Deputy Chairman, Mr Roberts-Thomson represents HTAL in government relations and strategic projects and has served as a director of VHA since 2001.

  • Susan Mo Fong Chow, also known as Woo Mo Fong, Susan (alias Chow Woo Mo Fong, Susan)

    Director BSc

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    Mrs Susan Chow (aged 66), has been a non-executive director of CK Hutchison Holdings Limited (“CKHH”) since January 2017. She was an executive director and group deputy managing director of CKHH from June 2015 to July 2016, senior advisor of CKHH from August 2016 to December 2016, executive director of Hutchison Whampoa Limited (“HWL”, which was privatised by way of a scheme of arrangement and became a wholly owned subsidiary of CKHH since June 2015) from October 1993 to June 2015, deputy group managing director from January 1998 to June 2015 and director from June 2015 to July 2016. Prior to joining HWL, Mrs Chow was a partner of Woo Kwan Lee & Lo, a major law firm in Hong Kong. Mrs Chow is an alternate director to director of CK Infrastructure Holdings Limited since May 2006, HK Electric Investments Manager Limited as the trustee-manager of HK Electric Investments, and HK Electric Investments Limited since November 2014.

    She previously served as a member of the Listing Committee of The Stock Exchange of Hong Kong Limited, the Joint Liaison Committee on Taxation of the Law Society of Hong Kong, the Committee on Real Estate Investment Trusts of the Securities and Futures Commission, the Trade and Industry Advisory Board, the Court of the Hong Kong University of Science and Technology and the Appeal Boards Panel (Education). Mrs Chow is a qualified solicitor and holds a Bachelor’s degree in Business Administration.

  • Justin Herbert Gardener

    Director BEc, FCA, AGIA

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    Justin Herbert Gardener, aged 83, has been a Director since July 1999. Mr Gardener has been a director of a number of private and publicly listed companies including Austar United Communications Limited (appointed 1999 and retired 2008). From 1961, and until his retirement in 1998, Mr Gardener held a variety of positions with Arthur Andersen, becoming a partner in 1972 and for the last ten years in a management and supervisory role for Asia Pacific. Mr Gardener is a Fellow of the Institute of Chartered Accountants and an Associate of the Governance Institute and holds a Bachelor of Economics Degree.

  • Lai Kai Ming, Dominic

    Director BSc, MBA

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    Lai Kai Ming, Dominic, aged 66, has been a Director since May 2004 and Alternate Director to Mr Sixt since May 2006 and to Mr Fok since December 2016. Mr Lai has been an executive director and deputy managing director of CKHH since 2015. Since 2000, he has been a director of HWL which became a wholly owned subsidiary of CKHH in 2015. Mr Lai has been a non-executive director since 2009 and an alternate director to directors since 2010 of HTHKH. He has been an alternate director to a director of TOM Group Limited (“TOM”) since 2016. He has been a member of the board of commissioners of PT Duta Intidaya Tbk since 2018. The aforementioned companies are either the ultimate holding company of HTAL, or subsidiaries or associated companies of CKHH of which Mr Lai oversees the management. He has also been a director of VHA since 2016. Mr Lai has over 35 years of management experience in different industries. He holds a Bachelor of Science (Hons) degree and a Master’s degree in Business Administration.

  • John Michael Scanlon

    Director

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    John Michael Scanlon, aged 78, has been a Director since July 2005. Mr Scanlon is a special venture partner to Clarity Partners LLP, a private equity firm. From 1965 through to 1988, his career was with AT&T, primarily Bell Labs, rising to group vice president of AT&T. Mr Scanlon then went on to become president and general manager of Motorola’s Cellular Networks and Space Sector, founding chief executive officer of Asia Global Crossing, chief executive officer of Global Crossing and chairman and chief executive officer of PrimeCo Cellular.

  • Frank John Sixt

    Director MA, LLL

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    Frank John Sixt, aged 68, has been a Director since January 1998 and Alternate Director to Mr Lai since February 2008. Mr Sixt has been an executive director, group finance director and deputy managing director of CKHH since 2015. Since 1991, he has been a director of Cheung Kong (Holdings) Limited and HWL, both of which became wholly owned subsidiaries of CKHH in 2015. He has been chairman and a non-executive director of TOM since 1999 and an executive director of CKI since 1996. Mr Sixt has also been a director of Husky Energy since 2000. He has been an alternate director to a director of HKEIML as the trusteemanager of HKEI and of HKEIL since 2015. The aforementioned companies are either the ultimate holding company of HTAL, or subsidiaries or associated companies of CKHH of which Mr Sixt oversees the management. He has also been a director of VHA since 2001. Mr Sixt holds a Master’s degree in Arts and a Bachelor’s degree in Civil Law, and is a member of the Bar and of the Law Society of the Provinces of Québec and Ontario, Canada.

  • Ronald Joseph Spithill OAM

    Director BScTech

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    Ronald Joseph Spithill, aged 78, has been a Director since November 2010. Mr Spithill was a director of Telecom Corporation of New Zealand Limited from 2006 until 2011 and serves on a number of NGO boards. Mr Spithill has also been a director of VHA since 2010. He was previously president of Alcatel Asia Pacific responsible for operations in 16 countries, executive vice president and chief marketing officer of the Paris-based Alcatel group and vice-chairman of Alcatel Shanghai Bell. He has been chief executive officer and chairman of Alcatel Australia. He is a past president of the Telecommunications Industry Association of Australia and served with the AEEMA Board, the Australian Business Council, the Malaysian Government Industry Advisory Panel, the New Zealand Independent Industry Oversight Group, the NSW Government IT Advisory Board and the Australian Government “Goldsworthy” Committee. Mr Spithill is a Fellow of the Australian Academy of Technological Sciences and Engineering and a Distinguished Fellow of the Telecommunications Society of Australia.

  • Woo Chiu Man, Cliff

    Director BSc

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    Woo Chiu Man, Cliff, aged 66, has been a Director since August 2016. Mr Woo has been an executive director and chief executive officer of HTHKH since 2017 and was re-designated as codeputy chairman and a non-executive director of HTHKH in 2018. He has been an alternate director to a director of VHA since 2016. He held various senior technology management positions in the telecommunications industry before joining in 1998 the group of HWL. He was deputy managing director of Hutchison Telecommunications (Hong Kong) Limited from 2000 to 2004. He was also an executive director of Hutchison Telecommunications International Limited in 2005. He was seconded to VHA as chief technology officer from 2012 to 2013 and was part of the core management team. He possesses extensive operations experience in the telecommunications industry and has been involved in cellular technology for over 30 years. Mr Woo holds a Bachelor’s degree in Electronics and a Diploma in Management for Executive Development. He is a Chartered Engineer and also a Member of The Institution of Engineering and Technology (UK) and The Hong Kong Institution of Engineers.

AGM details

The Annual General Meeting of shareholders of Hutchison Telecommunications (Australia) Limited (ABN 15 003 677 227) (HTAL) will be held at 177 Pacific Highway, North Sydney, New South Wales on Thursday, 7 May 2020 at 10.00 am (Sydney time).

How to find us

We are located at 177 Pacific Highway, North Sydney within short walking distance of North Sydney train station. Whilst parking is not available onsite, there are various parking stations located nearby.

For public transport information please call 131 500 or visit transportnsw.info.

Add to Calendar 05/07/2020 10:00 AM Australia/Sydney 2020 Hutchison Annual General Meeting Annual General Meeting of shareholders of Hutchison Telecommunications (Australia) Limited 177 Pacific Highway, North Sydney

Download Notice of AGM 2020 (507KB)

Chairman's Message

Hutchison Telecommunications (Australia) Limited (“HTAL” or the “Company”) (ASX: HTA) accounts for its investment in Vodafone Hutchison Australia Pty Limited (“VHA”) using the equity method of accounting. Under this method, revenue from VHA’s ordinary activities is not included in HTAL’s consolidated revenues from ordinary activities.
In 2019, VHA achieved market-leading customer sentiment and maintained a broadly stable underlying financial performance. This is despite facing significant regulatory challenges including the Australian Competition and Consumer Commission’s (“ACCC”) opposition to VHA’s proposed merger with TPG Telecom Limited (“TPG Telecom”, ASX: TPM) and the Federal Government’s 5G vendor restrictions.

With continued support from CK Hutchison Holdings Limited and its joint shareholder Vodafone Group Plc, VHA achieved a steady EBITDA result.

Key 2019 achievements and highlights of VHA:

  • Progressed 5G with selection of Nokia as network vendor;
  • Highest Net Promoter Score (NPS) of the major Mobile Network Operators;
  • Continued to improve rate of customer complaints to the Telecommunications Industry Ombudsman (“TIO”) with less than half the industry average;
  • Recognised for its customer focus with two major industry awards;
  • Reached 100,000 Vodafone NBN fixed customers; and
  • VHA continued to progress regulatory approval of the merger with TPG Telecom by commencing Federal Court proceedings seeking competition approval of the merger.

2019 financial results

In a challenging regulatory environment and amidst continued aggressive competition, VHA produced a steady underlying financial performance.

VHA postpaid customer base was steady at 3.4 million, a 1.1% YoY decrease from 3.5 million. VHA maintained its base with its strong mobile network, generous data inclusions and best-in-market $5 Roaming product.

VHA prepaid customer base was 2.0 million, an 8.6% YoY decrease from 2.2 million, amidst very intense competition in the segment.

VHA’s Mobile Virtual Network Operator (MVNO) customer base was 310,000, a 12.9% YoY decrease from 356,000.

VHA’s fixed customer base was 114,000, a YoY increase of 245.5% from 33,000. VHA launched fixed services via the National Broadband Network in April 2018 and has been steadily growing its customer base.

HTAL’s share of VHA total revenue decreased 2.8% YoY to $1,761.7 million from $1,813.2 million, due to the change in customer base.

VHA ARPU (Average Revenue Per User) was $33.35, which represented a 4.9% YoY decrease from $35.05, driven by increased competition.

HTAL’s share of VHA’s EBITDA increased 6.9% YoY to $589.4 million from $551.1 million. This is driven by a positive $71.0 million impact from the IFRS16 accounting change. The underlying decline of $38.3 million was due to a decline in revenue partially mitigated by continued focus on managing costs. In a year-on-year comparison without IFRS16, HTAL’s share of VHA EBITDA would have been $518.4 million, a 5.9% decrease.

HTAL’s share of VHA net loss was $159.1 million, a YoY increase from $5.0 million, driven by the EBITDA result, lower commission capitalisation, increased depreciation and amortisation, and interest costs. In a year-on-year comparison without IFRS16, HTAL’s share of VHA net loss would have been $135.1 million.

VHA-TPG Telecom merger case heard in Federal Court

On 24 June 2019, following the ACCC’s 8 May 2019 announcement that it would not provide competition clearance to the proposed merger between the two companies, VHA and TPG Telecom filed a legal action in the Federal Court of Australia seeking a declaration that the merger is not prohibited under Section 50 of the Competition and Consumer Act 2010.

The case was heard by Justice Middleton in Melbourne between 10 September and 1 October 2019.

On 13 February 2020, the Federal Court ruled that the proposed merger between VHA and TPG Telecom would not substantially lessen competition and should be allowed to proceed. VHA, along with TPG Telecom, will work to complete the merger in mid-2020, subject to the remaining regulatory and shareholder approvals and any appeal by the ACCC.

VHA is also undertaking a restructure of its debt facilities as a condition of the Scheme Implementation Deed and subject to the merger proceeding. The refinancing is expected to complete concurrently with the implementation of the merger.

VHA takes the next big step in 5G

In December 2019, VHA took another significant step in its 5G journey with the announcement that it has partnered with Nokia to roll out its 5G mobile network and deliver the benefits of the next generation of mobile networks to its customers.

The partnership builds on years of collaboration and enables VHA to deliver its commercial 5G services.

VHA will switch on its first commercial 5G sites in the first half of 2020, when it transforms an existing test network in the Sydney suburb of Parramatta into its first live 5G site.

VHA continues to lead customer sentiment, lowest complaints rate

VHA continued its track record as an industry leader in customer service in 2019 with the highest NPS of the mobile network operators, while its rate of customer complaints to the TIO was less than half the industry average.

VHA won a Canstar Blue award for Provider of the Year for SIM Only mobile plans and was recognised at the ACOMM industry awards for Best Mobile Solution for its endless data and no lock-in contracts.

VHA’s $5 Roaming product, which is available in more than 80 global destinations, continues to be a key driver of customer acquisitions and upgrades.

The Vodafone NBN customer base more than tripled during 2019, with customers attracted to VHA’s 4G back up and promotional offers to connect to the top tier NBN speed for a market-leading price.

VHA also became the first telco to partner with Amazon Prime to offer customers on selected plans a twelve-month Amazon Prime membership.

To further its digital transformation strategy, VHA welcomed the new Chief Information Officer and Director of Business Enablement, Rob James in September 2019. With responsibility for IT, Mr James’ appointment enables the IT team, which previously sat with Network, to focus exclusively on IT strategy and key projects.

To raise brand awareness among key market segments, VHA continued its sponsorships with Rugby Australia, Supercars, Adelaide Strikers and the Sydney Gay and Lesbian Mardi Gras. Star cricketer Steve Smith and Supercars champion Jamie Whincup continued in the role of VHA brand ambassadors.

Vodafone Foundation expands positive impact

In 2019, Vodafone Foundation continued to help improve the health and wellbeing of Australians through its technology-driven partnerships with the Garvan Institute of Medical Research and Hello Sunday Morning.

In 2019, the Foundation’s DreamLab app, which helps solve cancer using the processing power of idle smartphones while users sleep, launched in Italy and Romania, bringing the app to five Vodafone markets. DreamLab’s 350,000 users donated their computing power to help complete two more discoveries in half the time.

Vodafone Foundation also funded a pilot program with Infoxchange, to examine ways the AskIzzy app might better support people experiencing family and domestic violence.

Outlook

Intense competition in the Australian telecommunications market is expected to continue to impact industry revenues and ARPUs throughout 2020. VHA will continue its focus on reducing costs to manage its financial performance.

VHA will also continue its strategy of striking a balance between maintaining a sustainable business model, whilst delivering value to Australian customers.

On 13 February 2020 the Federal Court ruled that the proposed merger between VHA and TPG Telecom would not substantially lessen competition and should be allowed to proceed. VHA will work towards implementation of the proposed merger which remains subject to an appeal, as well as shareholder and other regulatory approvals.

The merger would create a third fully-integrated telecommunications company with the scale to compete head-to-head across the whole telecommunications market in Australia. It would also provide investment certainty for the future, including for the company’s 5G rollout.

While the merger process continues, VHA will continue to work towards the launch of 5G mobile services in 2020 and take opportunities to deliver increased value propositions to mobile and fixed customers.

HTAL remains committed to its investment in VHA and will continue to support VHA in the future.

Additional matters

On 5 March 2020 the ACCC announced that it would not appeal the decision of the Federal Court and we are pleased that definitive Australian competition clearance for the proposed merger between VHA and TPG has now been obtained.

After the COVID-19 outbreak in early 2020, HTAL is paying close attention to the development of, and the disruption to business and economic activities caused by the outbreak and its potential impact on the financial position, cash flows and operating results. Given the dynamic nature of the COVID-19 outbreak, it is not practicable to provide a reasonable estimate of its impacts on HTAL’s financial position, cash flows and operating results at the date of this annual report.

Fok Kin Ning, Canning Chairman