PCCW reports audited consolidated 2002 final results

  • Loss attributable to shareholders of HK$7,762 million (approximately US$995 million) after write-down of REACH stake and accounting loss on RWC disposal
  • EBITDA increased 10 percent to HK$8,120 million (approximately US$1,041m)
  • EBITDA margin increased to 40 percent from 34 percent
  • Operating profit, before net gains on investments, provision for impairment losses, and restructuring costs rose 9 percent to HK$5,212 million (approximately US$668m)
  • Operating cash flow, after interest, tax and capital expenditure (but before investment in Cyberport) increased 54 percent to HK$3,351 million (approximately US$430m)
  • Net debt** fell by 16 percent to HK$32,919 million (approximately US$4,220m)
  • Revenue dropped 8 percent to HK$20,112 million (approximately US$2,578 million). Recurring revenue excluding Cyberport entrustment fees and property sales income decreased 5 percent to HK$20,029m (approximately US$2,568m)
  • Company reaffirms dividend objective but decides not to pay in 2004

Hong Kong, March 20, 2003 - PCCW Limited posted solid operating earnings for 2002 after a strong performance in core services and efficiency gains offset fierce competition in the fixed-line market.

The Company was well advanced in paying down its debt and continued to improve its free cash flow, despite weak economic conditions.

PCCW wrote down the value of its 50 percent stake in the REACH joint venture with Telstra by HK$8,263 million (approximately US$1,059m). It also booked an accounting loss of approximately HK$1,771 million (approximately US$227m) from the disposal of the Group's 40 percent stake in the Regional Wireless Company (RWC) joint venture.

The result was a net loss attributable to shareholders of HK$7,762 million, compared to a restated net profit of HK$ 1,343 million (approximately US$172m) for 2001.

The accounting treatment relating to REACH and RWC does not impact on the Group's operations, cash flows, revenues, profit from operations or EBITDA.

Operating profit before net gains on investments, provision for impairment losses and restructuring costs for the year rose by 9 percent to HK$5,212 million (approximately US$668m).

Group EBITDA for 2002 was HK$8,120 million (approximately US$1,041m), representing a 10 percent increase over the 2001 figure, while Group EBITDA margin expanded to about 40 percent, compared to 34 percent the previous year. This was mainly due to cost savings from restructuring the Group’s Internet services business, plus a reduction in wholesale international traffic disbursements, overall productivity improvements in operating costs and careful control of corporate overheads.

Operating cash flow - after interest, taxes and capital expenditure, but before contributions to Cyberport - rose by 54 percent to HK$3,351 million (approximately US$430m).

Net debt** was cut by about 16 percent from HK$39,305 million (approximately US$5,039m) in 2001 to HK$32,919 million (approximately US$4,220m) by the end of 2002. And the average cost of debt dropped from 6.6 percent last year to 5.0 percent.

PCCW Chairman and CEO Richard Li said: "PCCW continues to perform well, to contain costs and navigate through a difficult regulatory environment, while delivering quality service.

"Looking forward, our primary objective is debt reduction and prudent financial management, and improving free cash flow by pursuing efficiencies, while limiting our future investment in Cyberport. We will continue to look for ways to improve revenue by offering new products and services and by considering investments that are consistent with our financial priorities and which meet strict criteria."

Mr. Li added: "Our debt reduction and ratings goals remain the same. What has changed, however, is that the global political and economic situation has become increasingly uncertain. Bearing that in mind, we believe it prudent to continue to strengthen our balance sheet in the interest of investors. Therefore, we will not pay a dividend in 2004. Our objective remains to pay a dividend in the medium term. To do so we must continue to make significant progress toward the stated goals of debt reduction and move towards the desired 'A' credit rating for Hong Kong Telephone Company (HKTC) debt."

Overall revenue in 2002 fell to HK$20,112 million (approximately US$2,578m) from HK$21,959 million (approximately US$2,815m) due partly to the decision to exit from certain non-profitable businesses, as well as a softening in the economy which affected demand in the fixed-line market. But the drop of 8 percent was also brought about by the substantial reduction of one-off revenues produced the previous year by Cyberport entrustment fees and property sales. That means recurring revenue for 2002 dropped by just 5 percent.

Chief Operating Officer Mike Butcher said: "We have delivered on promises by reducing our debt, maintaining a healthy cash reserve and achieving organic growth in broadband and Business eSolutions, while driving down costs."

Despite adverse economic conditions and increasingly aggressive competition, PCCW experienced strong demand for its broadband products and services.

The total number of PCCW broadband access lines increased by 39 percent to approximately 559,000, while PCCW's consumer broadband end-customers rose by 36 percent to approximately 424,000.

The company's integrated communications and IT services arm, Business eSolutions, performed well with revenue increasing 15 percent to HK$2,234 million (approximately US$286m). That performance represented an 11 percent contribution to Group revenue, compared to 9 percent the previous year.

Looking forward, PCCW expects to see additional cost savings in the current year as a result of improvements in operating efficiency in 2002. These included resetting staffing levels from 14,583 in 2001 to 11,560 in 2002.

Another efficiency boost was the launch of Cascade, a wholly-owned subsidiary, and now one of Hong Kong's largest technical services companies. Some 3,000 PCCW employees transferred to Cascade, which serves PCCW's ongoing network-support needs, as well as seeking other business opportunities across Asia-Pacific.

In a similar move, a further 1,600 PCCW employees took advantage of the opportunity to join subcontracting companies, independent of PCCW.

** Net debt refers to long-term liabilities plus short-term borrowings, minus cash and cash equivalents and fixed deposits placed for banking facilities for the Cyberport project.

About PCCW

PCCW Limited (SEHK: 0008, ADR-NYSE: PCW), the Hong Kong-listed flagship of the Pacific Century Group, is one of Asia's leading integrated communications companies. From its market-leading position in Hong Kong, PCCW is focused on building shareholder value by leveraging synergies between its core businesses and partners, and by delivering customer-led total solutions throughout Asia. PCCW provides key services in the areas of: integrated telecommunications; broadband solutions; connectivity; narrowband and interactive broadband (Internet Services); business e-solutions; data centers and related infrastructure.

To learn more about PCCW, go to

Forward Looking Statement
The statements included in this press release that are not historical in nature are "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. These forward-looking statements, which may include statements regarding PCCW's future results of operations, financial condition or business prospects, are subject to significant risks and uncertainties and are based on PCCW's current expectations.

Actual results may differ materially from those expressed or implied in these forward-looking statements as a result of a variety of factors. These factors are discussed in PCCW's reports furnished to or filed with the U.S. Securities and Exchange Commission, including, but not limited to, PCCW's most recent Annual Report on Form 20-F.

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Investor Relations
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2002 Annual Results Announcement - Analyst Presentation