The dominant pay-TV operator in Hong Kong reported a record interim profit of HK$155 million, compared with HK$147 million a year earlier, as its broadband business achieved its first operating profit earlier than expected.

Broadband had an operating profit of HK$31 million, compared with a loss of HK$27 million a year earlier.

Total sales rose to HK$1.22 billion from HK$1.15 billion as the number of subscribers to pay-TV and broadband jumped 36 percent and 38 percent respectively to 718,000 and 301,000.

Nonetheless, net profit was at the low end of analysts' expectations of HK$154 million to HK$172 million.

Analysts continue to worry about the impact of rising program spending on i-Cable's earnings as competition in pay-TV heats up.

``We are concerned about some of the exclusive sports broadcasting rights that will be expiring shortly,'' said an analyst at a local brokerage. i-Cable recently lost some movie channels to its rival NOW TV, which belongs to fixed-line telecoms leader PCCW.

i-Cable spent HK$421 million to purchase programs during the first half. The 15 percent rise was mainly due to the cost of exclusive rights to broadcast English Premier League football.

Chief executive Stephen Ng said i-Cable was well prepared to bid prices even higher for features, such as football, that are popular with subscribers.

``Sports channels have the highest viewership, so we would spend more to secure the broadcasting rights,'' Ng said.

However, he said an aggressive bidding strategy would not harm the company's expansion. Both revenue and subscriber growth are on track, he said. ``We see programming costs growing only by single digits in coming years,'' he added.

Ng said capital expenditure had peaked in 2004, and the company's first-half capital outlay of HK$125 million was down 47 percent from a year earlier.

Apart from pay-TV and broadband, i-Cable also expects its film production venture to be a growth driver. ``Higher overseas distribution rights could fully offset expensive production costs,'' Ng said.

The production venture will deliver at least six or seven titles in the second half, he added. The company plans to invest up to HK$300 million to make about 20 films in the next two years as a hedge against the increase in program costs. Though rivals Galaxy Satellite Broadcasting and NOW are seen launching high-definition TV early next year, i-Cable is in no hurry to match them since it sees little consumer interest in the service. ``We are well placed to launch the service but the time is not yet ripe,'' Ng said.

i-Cable declared an interim dividend of 3.5 HK cents, versus 3 cents a year earlier. kc.wong@singtaonewscorp.com