CABLE & WIRELESS HKT LIMITED
FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2000
- Revenue and earnings decreases result from liberalisation of international telecommunications services and intense price competition throughout the financial year.
- Full year results reflect major write down of obsolete assets undertaken in the first six months
- Strong revenue growth from Internet, data and wholesale services.
- Cost reductions and productivity improvements preserve healthy operating and EBITDA margins.
- Second interim dividend of 45 cents per share to be paid on 30 June 2000.
- Leadership of Hong Kong's Internet market reinforced with 74% growth in the number of customers.
- Asia's largest broadband Internet business with 77,000 customers.
- New services and geographic expansion gives the Company a strong position to capture pan-Asian growth from Internet connectivity, multimedia and e-commerce services to consumers and businesses through broadband fixed line and 3G wireless development.
|FINANCIAL HIGHLIGHTS||Year ended
31 March 2000
Results before provisions against fixed and other assets:
|Profit before taxation||HK$9,629m||(26.7)|
|Profit attributable to shareholders||HK$8,231m||(28.5)|
|Earnings per share||68.1 cents||(29.4)|
Results after provisions against fixed and other assets:
|Profit before taxation||HK$2,541m||(80.7)|
|Profit attributable to shareholders||HK$1,143m||(90.1)|
|Earnings per share||9.5 cents||(90.1)|
* Earnings before interest, taxation, depreciation and amortisation.
Cable & Wireless HKT has announced that its financial performance for the year ended 31 March 2000 has continued to be affected by the liberalisation of the international services market and intense price competition. This is reflected in the near 13 per cent reduction in total revenues and 29 per cent decline in earnings before provisions against fixed and other assets.
However, the Company's Internet and wholesale connectivity services delivered strong revenue growth while cost reductions and productivity improvements supported healthy operating margins overall.
Cable & Wireless HKT faces further significant competitive challenges, particularly with the development of international facilities based competition. However, recognising the Company's underlying financial strength, the Board has decided to pay a second interim dividend of 45 cents per share making a total for the year of 83.6 cents per share.
Chief Executive, Mr. Linus W.L. Cheung, says: "We are accelerating the transformation of Cable & Wireless HKT by realigning the Company's resources to drive growth in new businesses and into new markets. Revenues from international telephone services (IDD), which once represented the majority of the Company's income, now account for only 28 per cent of overall revenues. We have already made substantial investments for our broadband future and see expanding opportunities for the Company in the rapidly developing areas of consumer and business Internet, multimedia and e-commerce in Hong Kong and across Asia."
Mr. Cheung says: "During the year, we have reinforced our leadership in the Internet market in Hong Kong with 561,000 customers, including 77,000 customers for our high-speed broadband Internet services, which is the largest base of broadband customers in Asia. We have built one of the largest IP (Internet Protocol) backbones in Asia, we operate Hong Kong's largest data centre business providing facilities management and web hosting services, and we are building a comprehensive range of integrated e-commerce services to provide total solutions for local and global enterprises."
Cable & Wireless HKT is taking its capabilities into the Asia region to capture an early lead in these rapidly growing areas. It has expanded its presence in Taiwan, has new operations in Singapore and Korea, and will soon announce new investments in other countries in Asia. In addition, the Company has strong partnerships to accelerate its speed to market for new services and is building a broad portfolio of venture capital investments to seed future growth businesses.
In its telecommunications businesses in Hong Kong, the Company is enhancing its competitiveness by providing customers with a greater choice of services and world class customer support. This has helped the Company stabilise its position in the highly competitive retail IDD market and to sustain revenues per mobile customer. Its wholesale initiatives are building greater economies of scale in fixed line services in Hong Kong, where it is now the provider of choice for Internet access and network connectivity services.
Mr. Cheung says: "We have set a clear course for Cable & Wireless HKT's future development. The Company is positioned to quickly build scale in the rapidly growing areas of broadband Internet connectivity, interactive multimedia and e-commerce services in Hong Kong and to expand across the Asia region. At the same time, Cable & Wireless HKT continues to be one of world's most competitive telecommunications companies."
The Company will make a separate announcement today on the progress of the proposed merger with Pacific Century CyberWorks Limited.
REVIEW OF OPERATIONS AND FINANCIAL PERFORMANCE
- International Telecommunications Services
Revenue from international telecommunications services was HK$11,089 million, representing a 29 per cent decrease year-on-year.
Revenues from international telephone services fell 38 per cent year-on-year, as increased competition brought average retail IDD tariffs down by over 30 per cent. As the market is now fully competitive, the Company has attained more retail pricing flexibility through being classified as non-dominant on certain non-China routes, and now seeks a similar regulatory status for all routes. Greater pricing flexibility has enabled the Company to enhance its marketing programmes and to be more responsive to customer needs. This has helped stabilise its market share during the second half of the financial year. Gross margins for IDD were supported by a substantial 38 per cent reduction in international outpayments and delivery fees.
International transit traffic hubbed on the Company's network facilities increased by 126 per cent year-on-year as the Company strengthened its competitive position as an international wholesale carrier in the region. Revenues from the Company's wholesale international leased circuits and managed network services increased 22 per cent year-on-year. Demand for high bandwidth connectivity continues to be driven by rapidly growing Internet usage across the Asia region. Total international leased circuit capacity increased by 81 per cent to 2,171 Megabits per second (Mbps). The Company's NETPLUS business is now well established as Hong Kong's leading provider of local and international Internet connectivity and operates one of Asia's largest Internet backbone networks.
Increasing choice of international transmission facilities led to a 10 per cent decline in Cable & Wireless HKT's wholesale switched international traffic. The loss of traffic increased as a result of competitors continuing to refile traffic through third countries during 1999, particularly on the China routes.
The Hong Kong SAR Government has issued 13 licences for the operation of satellite-based international telecommunications facilities and letters of intent in respect of 15 cable-based international facilities. This is in addition to the four existing licences for local and international fixed telecommunications services, including that held by the Company. The Government has stated that it does not intend to limit the number of international operators within the current financial year. It is expected that competition in this market will be intense, although the Company is well positioned to compete due to the scale, low cost and diversity of its international network facilities, its strong reputation for reliability, and an established base of customers.
- Local Telecommunications Services
Local telecommunications services revenues increased to HK$10,243 million, up 9 per cent year-on-year. Growth has been primarily driven by increased demand for Internet, data and network interconnection services and sales of network and computer products as well as an increase in residential fixed line charges implemented on 1 September 1999. Overall fixed line growth was 2 per cent year-on-year.
High-speed broadband customer connections increased by 60 per cent to over 143,000 lines as at 31 March 2000. A record 32,000 broadband connections were installed during March alone and customer demand continues to be very strong. The Company's broadband fixed network is available to approximately 95 per cent of Hong Kong's homes and businesses and offers dedicated bandwidth to support delivery of high speed Internet, interactive multimedia and e-commerce services.
Total dial-up Internet traffic in Hong Kong grew 116 per cent year-on-year to some 12.4 billion minutes, approximately 90 per cent of which was delivered by Cable & Wireless HKT. The Company continues to build scale and efficiency in its fixed network operations by offering managed wholesale products and services to other carriers, service providers and corporate customers.
Local equipment sales increased 17 per cent, driven by a 57 per cent growth in sales of local area network products and personal computers to support Internet and e-commerce services.
- Mobile Services
Revenue from mobile services fell 15 per cent year-on-year to HK$4,942 million.
Mobile penetration in Hong Kong has now reached approximately 60 per cent, although prices and margins have fallen significantly, particularly since the introduction of mobile number portability in March 1999. The Company has continued to focus on providing its customers with the highest quality network and widest choice of wireless information and transaction services, including Hong Kong's most comprehensive WAP-based services. This approach has been very successful in maintaining a low rate of customers switching to other operators and sustained service revenues relative to the overall market. The Company's customer base grew by 33,000 in the last six months to 958,000. For the second successive year, the Company was named the best mobile carrier in Asia by Telecommunications Asia magazine.
Revenues from mobile equipment sales increased 28 per cent year-on-year, largely due to increased sales of new dual-band and WAP-enabled handsets and reduced handset subsidies in the second half of the financial year.
Cable & Wireless HKT is building a strong foundation for the third generation of wireless communications services through the development of mobile Internet and e-commerce applications within its bilingual i.Menu wireless portal and by the introduction of high speed data transmission technology. The Company's most recent additional services include Mobile CQ, an on-line chat service, and a WAP-based Internet search engine, i.Search. The Company has also recently completed a pilot programme for new enterprise applications for wireless connection to corporate networks.
Higher speed GPRS packet switched services are planned to be introduced in the third quarter of the current financial year. In February 2000 the Company successfully completed the first phase of its 3G network technology trials with Nokia.
- Internet & Interactive Multimedia Services
Revenues from Internet and interactive multimedia services were up 66 per cent year-on-year to HK$1,041 million.
NETVIGATOR is the clear leader in the dial-up and broadband Internet access market in Hong Kong with a total of 561,000 customers, up 74 per cent year-on-year. Demand for high-speed Internet connections increased strongly in the last quarter of the year. The number of residential and business customers for the Company's broadband services grew more than seven-fold during the year to reach 77,000 at 31 March 2000.
The Company's dial-up customer base grew by 56 per cent to 484,000 customers. NETVIGATOR's reputation for high quality connectivity and customer service was recognised by readers of PC World Hong Kong magazine who voted it Hong Kong's best Internet service provider for 1999, the third consecutive year it has received this accolade.
NETVIGATOR's popular Internet portals in Hong Kong and Taiwan now attract some 6.2 million daily page views and have some 576,000 registered users.
The Company has some 90,000 customers for its broadband Interactive Television Services (iTV). Revenues from these services have increased by 155 per cent year-on-year, driven by substantially increased pay-per-view income. The Company intends to enhance the capabilities of iTV by introducing Internet features and digital broadcast television services later this year.
- Integrated e-Business Solutions
Cable & Wireless HKT has established a new Integrated e-Business Solutions unit to build on its capabilities in information and communications technology to develop and provide tailor-made business-to-business services for its enterprise customers in Hong Kong.
This will leverage the Company's strength as Hong Kong's leading provider of dedicated leased line Internet access with over 3,200 customers, and Hong Kong's largest operator of data centres and web hosting facilities with over 200,000 square feet currently occupied. In addition, the Company's business.netvigator.com portal is one of the leading sites focused on serving small and medium sized enterprises in Hong Kong.
The Company is increasingly co-venturing with leading international partners to accelerate speed to market for new e-commerce applications and services, and has recently announced developments relating to on-line marketplaces and business portals, on-line data security, application service provision and on-line payment systems.
- Regional Businesses
In Taiwan, FIC Network Services, now an 85 per cent-owned subsidiary, has grown its Internet access customer base by 450 per cent from 40,000 to over 220,000 dial-up customers at 31 March 2000.
Earlier this year, Cable & Wireless HKT launched new Internet access and data centre operations in Korea and Singapore, and is currently in advanced negotiations for the acquisition and launch of similar businesses in several other Asian countries.
The Company's call centre business has a rapidly growing base of customers in Hong Kong and recently opened its first overseas operation in Taiwan, with plans to expand into other Asian markets.
- Operating Costs
Overall operating costs were reduced by nearly 4 per cent to HK$19,849 million.
The liberalisation of the international services market resulted in significantly lower delivery fee payments to other telecommunications operators and enabled the Company to achieve substantial reductions in accounting rates. These costs were reduced to HK$3,906 million for the year, some 38 per cent lower than the previous year.
Staff costs fell 3.5 per cent year-on-year to HK$3,970 million and the number of employees was 13,857 at 31 March 2000.
- Provisions against fixed and other assets
As stated in the interim results announcement in November 1999, a provision totalling HK$7,088 million was made in respect of write-downs and write-offs of certain fixed and other assets. This included asset adjustments relating primarily to older generation switched telephone network and related equipment, early investments in proprietary interactive television services equipment and mobile services equipment of HK$6,480 million, and the write down of HK$608 million in deferred mobile customer acquisition costs.
- Second Interim Dividend
A second interim dividend payment is being made instead of a final dividend to ensure that shareholders receive the benefit of a dividend without delay. This year's annual general meeting will not be held until August or September, after the extraordinary general meeting in June 2000 which is to consider the proposed merger with Pacific Century CyberWorks Limited.
Shareholders will not be offered a scrip alternative to the cash dividend as the Company needs to be certain of the number of shares outstanding for the documentation to be sent to shareholders in connection with the extraordinary general meeting.
For further information, please contact:
Mimi W. Lam
General Manager, Corporate Communications
Tel: +852 2883 0828
Fax: +852 2962 5133
Simon R Smith
Manager, Investor Relations
Tel: +852 2883 0858
Fax: +852 2962 5003
Cable & Wireless HKT
Cable & Wireless HKT, a Cable & Wireless company, is Hong Kong's major full-service communications provider, marketing a full array of quality voice and data telecommunication services backed by a state-of-the-art, fully digital fibre-optic network. Services include basic telephony, mobile telephony, international calls, specialised fax and data products, value-added services, Internet access, multimedia services, satellite links and telecommunications equipment and systems.
The outstanding quality of Cable & Wireless HKT's services was recognised in the global award of "Most Competitive Local or National Carrier" conferred in the Financial Times Global Telecommunications Awards in October 1999. Additionally, in a survey conducted by CFO Asia in November 1999, Cable & Wireless HKT was named as the number one company in Asia based on the wealth it has created for shareholders.
Apart from owning and operating Asia's largest commercial teleport, Cable & Wireless HKT is a pioneer in a wide range of communications solutions, such as launching the world's first fully digitised urban network, the world's first fibre-optic cable linking China, and the worldyy first interactive television services.
Cable & Wireless
With customers in 70 countries, Cable & Wireless is a major global telecommunications business with revenue of around ￡8 billion in the year ended March 1999 and over 50,000 employees. Its businesses around the world offer a range of services spanning broadband data and Internet services, fixed and mobile voice, as well as interactive entertainment and information. Cable & Wireless' priority for expansion is the fast growing market of data and IP (Internet Protocol) services for business customers. Since November 1998, it has announced major investments in advanced networks in the US and Europe, the restructuring of Cable & Wireless Communications in the UK and has acquired full control of Cable & Wireless IDC in Japan to support this strategy. Cable & Wireless now holds a unique position in terms of global coverage and services to business customers.