Beijing : South Korean telecom giant Samsung Electronics expects to post a record operating profit of more than $14 billion in the fourth quarter, it said Tuesday, boosted by huge demand for its memory chips.
The booming chip unit has helped the firm overcome a bribery scandal that saw its de facto head jailed and the embarrassing Galaxy Note 7 debacle.
Samsung estimated operating profits would hit 15.1 trillion won ($14.1 billion) in October-December, nearly double the 9.2 trillion won posted a year earlier.
However, the figure was below analyst forecasts, which averaged 16.1 trillion won in a survey by Bloomberg News.
Full-year operating profit was projected at 53.6 trillion won — also a record.
Samsung was dealt a blow in August when Lee Jae-Yong was jailed after being found guilty of bribery, perjury and other charges relating to payments made by Samsung to ousted president Park Geun-Hye`s secret confidante. He is appealing his five-year sentence and says he is innocent.
That came after a damaging recall in 2016 of its flagship Galaxy Note 7 over exploding batteries, which cost it billions of dollars and dealt a blow to its global reputation.
But the travails have not impacted demand for Samsung Electronics` products.
Fourth-quarter sales were projected to have jumped 23.8 percent year-on-year to 66 trillion won, with full-sales estimated at 239.6 trillion won.
The firm`s share price sank two percent in Seoul with analysts raising concerns about the impact of a stronger won and lower chip prices
“The won-dollar exchange rate is worrisome,” Lee Seung-Woo, an analyst at Eugene Investment and Securities, said in a report before the announcement, according to Bloomberg News.
But Greg Roh, an analyst at HMC Investment Securities, said the figures were “satisfactory” despite missing estimates.
“I think Samsung overspent on marketing because it was the end of the year,” Roh told AFP, and added: “The first quarter for this year looks good for Samsung.”
Samsung will reportedly roll out its new flagship smartphone, the Galaxy S9, next month, to compete with rival Apple`s iPhone X.
Analysts say that the launch of the new model will boost the mobile division, which faces fierce competition from Apple and Chinese manufacturers.
Since the arrest of some of its top executives last year, the wider Samsung Group — whose turnover is equivalent to a fifth of South Korea`s gross domestic product — has dismantled its Future Strategy Office, the coordinating body that oversees major decisions such as acquisitions or entering new business.
The group described the move as a “reform plan”, which would allow each unit — including Samsung Electronics, its flagship subsidiary — to run more independently in a transparent manner.
Samsung Electronics announced last October the first major reshuffle in its top leadership since 2014, when the wider group`s chairman Lee Kun-Hee suffered a heart attack that left him bedridden.
The company replaced each of the three co-CEOs who lead its semiconductor, mobile and TV units with younger executives, after its chief executive Kwon Oh-Hyun stepped down saying the South`s biggest firm was facing an “unprecedented crisis”.
The company is set to release its final earnings report later this month.
India should aspire for double digit growth: EAC member Shamika Ravi
New Delhi: India needs to make all efforts to reach ‘double digit’ growth and should not treat 7 per cent expansion as the ‘new normal’, Economic Advisory Council to the Prime Minister (EAC-PM) member Shamika Ravi said.
Ravi also refuted the contention of her EAC-PM colleague Rathin Roy that India could fall into the middle income trap — a term used by the World Bank to refer to nations that get stuck at a middle level of economic development as they attempt to grow rich.
“But emphasis now needs to be on how do we get back with the vision to that double digit growth,” Ravi said at event organised by Brookings India.
“The new normal of 7 per cent or perhaps weakening further because of the global trends cannot be the new normal for a country with per capita income that we do have,” she added
The Central Statistics Office (CSO) had in February revised downwards the growth estimate for 2018-19 fiscal from 7.2 per cent to 7 per cent — the lowest in five years.
Ravi also asserted that there needs to be reinforcement of mechanisms through which India can continue to aspire for double digit growth.
She maintained that India is unlikely to fall into the middle income trap.
“I don’t think India can afford that (middle income trap). I don’t think India is going to fall into the middle income trap like Brazil or South Africa,” the EAC-PM member opined.
Recently, EAC-PM member Rathin Roy had said the Indian economy is heading for a structural slowdown.
“The economy since 1991 has been growing not on the basis of exports… but on the basis of what the top 100 million of the Indian population wants to consume. Those 100 million or 10 crore Indian consumers who were powering India’s growth story have started to plateau out.
“It means in short we will not be South Korea. We will not be China. We will be Brazil. We will be South Africa. We will be a middle-income country with large numbers of people in poverty seeing rising crimes,” Roy had said.
The concept of the middle income trap was first put forward by the World Bank in a 2006 report on the development of East Asian economies.
The theory states that in many middle-income economies, growth slows and nations are unable to generate further economic momentum and grow rich.
Ravi also noted that India should not lose fiscal discipline which it maintained during the last five years of the Narendra Modi government.
The eminent economist also pointed out that states which are ranked high in ease of doing business have low unemployment rate compared to the all-India average.
“It’s important to realise that the recipe for job creation will also eventually come through entrepreneurship. Government cannot be final provider of jobs,” she said.
Shamika Ravi also stressed on the need to improve improve fundamental quality of India’s data systems.
IHCL, GIC strike Rs 4,000-crore deal to acquire premium hotels in India
Mumbai :One of India’s largest hotel chains, Indian Hotels Company (IHCL), has tied up with Singapore’s sovereign wealth fund GIC to jointly acquire premium hotels in the country. The initial outlay of deal is pegged at Rs 4,000 crore for a period of three years with GIC contributing 70 per cent and IHCL pitching in with the rest.
Each acquisition will be housed under a separate special purpose vehicle (SPV) and will be branded and managed by IHCL. The SPVs will acquire fully operational hotels which will also include distressed or underperforming hotels that can be turned around.
Puneet Chhatwal, managing director and CEO of IHCL, said: “The investment platform will acquire strategic and marquee assets that need new ownership branding and positioning.”
The new partnership is in line with IHCL’s asset light business model with about 40 per cent of the current rooms it operates falling under this model. The company has been increasing the management contract pie consistently over the past few years.
For GIC, the investment offers an opportunity to create a hospitality portfolio in major destinations across India. Kok Sun Lee, chief investment officer of GIC Real Estate, is confident of the outlook for India’s hospitality sector. “The partnership will offer GIC attractive opportunities and capture the sector’s growth potential,” he said.
chart Analysts believe the partnership is a win-win for both, especially given the long gestation period for the sector. “An investor with deep pockets such as GIC will help share the investment risk and will add to IHCL’s revenues both from management fees as well as branding,” says an analyst at a domestic brokerage. Given the increasing delays in execution for greenfield projects and poor returns from the same, major hotel chains, including IHCL, are now preferring to acquire or run hotels under the management contract model.
The total inventory in the premium category (luxury, upper upscale and upscale segments which will be acquired under this partnership) is pegged at 118,000 rooms and the segment is growing at 3-4 per cent a year. While there are opportunities, analysts believe that the initial capital may not suffice, as 500 rooms in this category would cost upwards of Rs 1,500 crore, considering that the cost per room of Rs 3-4 crore. The positive for the partnership, however, is that conditions are conducive given the uptick in the demand cycle and muted supply.
Aircel lenders agree to take 99% haircut on dues worth Rs 20,000 crore
Mumbai : In an unprecedented move, lenders to bankrupt telecom operator Aircel have agreed to take a massive 99 per cent haircut on their outstanding dues worth Rs 20,000 crore by agreeing to a Rs 150-crore upfront offer by UV Asset Reconstruction Company (ARC).
The move may lead to litigation as some of the operational creditors are planning to challenge the committee of creditors’ (CoC’s) decision in both local and US courts.
A source said the resolution plan was approved by 73.88 per cent (in voting share) of lenders and was rejected by Canara Bank and China Development Bank. State Bank of India, Syndicate Bank, Bank of Baroda, L&T Finance, Jammu & Kashmir Bank, Standard Chartered Bank, Punjab National Bank, Exim Bank, and Nordic Bank voted for the offer.
Aircel admitted itself to the National Company Law Tribunal (NCLT) in February 2018 even as all its directors resigned just before the bankruptcy filing.
According to the plan, the ARC will try to sell fibre, spectrum and telecom assets of the company to recover the bank dues. Aircel had shut its wireless services long ago and forfeited its customer base.
The company is currently conducting only part of its enterprise business and its employee strength stands reduced to just 200.
Like several telcos, Aircel lost its India business after the Supreme Court cancelled its pan-India wireless telephony licence in 2012.
A spokesperson of UV ARC declined to comment. The insolvency professional Vijay Iyer was not available for comment. In a related development, creditors who haven’t been paid are contemplating action in US courts against its earlier promoter Maxis, which has given indemnities to local operational creditors.
GTL Infrastructure, which has made a claim of Rs 13,000 crore over the termination of its contract, is also likely to take appropriate legal action if this plan gets implemented, said a person with knowledge of the matter.
GTL Infrastructure has already moved the NCLT as an operational creditor.
Aircel’s fibre business of around 15,000 km is not that sizeable, though it has presence in Jammu & Kashmir and the North East. Aircel also has under 2,000 towers (current valuations are at Rs 25 lakh a tower) and a total of around 85 MHz of spectrum, most of which is in the 2,100 band.
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