Hutchison Whampoa has warned that this year's group earnings would be hit by record losses at its loss-making third-generation (3G) mobile phone business.

The Hong Kong conglomerate controlled by Mr Li Ka-shing, Asia's richest tycoon, said losses from its 3G business were expected to peak in 2004 after hitting 18.3 billion Hong Kong dollars (€1.9 billion) last year.

"We will lose even more [in 2004\]," said Mr Li, adding that the 3G business was still expected to break even in 2005. It has more than one million customers in Italy, Britain and Hong Kong but needs an estimated 10-12 million to break even.

The rising losses could force Hutchison to sell businesses to cushion the negative impact of 3G on the rest of its profitable port-to-retail operations.

Yesterday, Hutchison reported a 44 per cent fall in 2003 pre-tax profits, partly due to the 3G losses.

The negative impact of 3G on last year's results was mitigated by the release of HK$7.8 billion in provisions - the last tranche of profits saved from asset sales.

"This year will be the worst year [for 3G's\] earnings before interest and tax because there are no provisions," said Mr Frank Sixt, Hutchison finance director.

The company is set to record a HK$1.3 billion profit from the recent listing of its Hong Kong fixed-line phone business and is set to float its Indian second-generation mobile phone business.

In the year to December 2003, Hutchison reported pre-tax profits of HK$10.5 billion (compared with HK$18.7 billion previously). Net profits were flat at HK$14.4 billion due to a HK$5.2 billion tax credit. Turnover rose 31 per cent to HK$145.6 billion. - (Financial Times Service)