2003 Interim Results Announcement

  • Consolidated revenue up 5 percent year-on-year to HK$10.726 billion (US$1.375 billion)
  • Group EBITDA margin before pre-sales of Residence Bel-Air increased to 42 percent from 40 percent
  • Profit attributable to shareholders HK$703 million (US$90 million) compared to loss of HK$448 million (US$57 million) year earlier
  • Net debt reduced 8 percent to HK$30.327 billion (US$3.89 billion) from HK$32.919 billion (US$4.22 billion) at end-2002, after proceeds of recent share placement
  • Rapid uptake of new generation fixed-line services, with 350,000 subscribers signing within the first six weeks


HONG KONG, August 28, 2003 – PCCW Limited today reported an attributable profit of HK$703 million (US$90 million), an improved EBITDA margin from operations, and a 5 percent increase in consolidated revenue for the six months to end-June 2003.

The Company also continued to significantly reduce debt. Net debt at June 30, 2003, adjusted to reflect the impact of the share placement in July 2003, was cut 8 percent to HK$30.327billion (US$3.89 billion) from HK$32.919 billion (US$4.22 billion) at Dec 31, 2002, with average maturity extended to about 7 years.

Continued strong growth in broadband services helped offset stiff competition in the telecommunications market amid challenging economic conditions. At the same time, the Company made further progress in maximizing operational efficiencies, building on last year's reorganization and restructuring.

The second half of 2003 has begun very positively with the launch of innovative value-added services aimed at further improving customer retention and revenue trends.

PCCW's new generation fixed-line services launched last month have seen extraordinary demand, with 350,000 subscribers signed up in the first six weeks. The Company has now set a new year-end target of 600,000 -- the original goal for end-2004.

PCCW Deputy Chairman and Group Managing Director Jack So said: "Hong Kong will remain the main focus of our business and we are confident that given a fairer regulatory regime and as the economy recovers and the trade links with the Mainland, especially the Pearl River Delta, further strengthen, our various business lines will benefit."

PCCW Chief Operating Officer Mike Butcher said: "We have delivered a solid operating performance and a stronger balance sheet, while maintaining our premium quality service, despite a difficult economic and regulatory environment.

"We are now building on this performance with positive initiatives that will further strengthen our competitive and financial position, reduce churn rates and help us to stabilize and grow our average revenue per user (ARPU). The response to our new fixed-line services has been significantly ahead of our expectations."

Consolidated revenue in the six months to June 30, 2003 rose to HK$10.726 billion (US$1.375 billion) from HK$10.203 billion (US$1.308 billion) for the same period in 2002, with pre-sales of units at the Residence Bel-Air property development, which began in February 2003, contributing HK$1.447 billion (US$186 million).

Despite difficult property market conditions in Hong Kong and the outbreak of SARS during the period, all of the 544 units available in Residence Bel-Air have been sold.

Strong revenue growth from broadband services and an increase in revenue from wholesaling local access lines partially offset declines in other areas of Telecommunications Services (TSS). The total number of broadband access lines rose to 629,000 at the end of June 2003 from 487,000 at the end of June 2002. The number of consumer subscribers of the Netvigator broadband service grew 20 percent to 460,000 for the same period.

Broadband growth has continued at above 10,000 lines per month. PCCW's market share of new lines is above 50 percent, while annual customer growth has been at 20 percent with steady premium ARPUs. PCCW is the clear market leader in one of the world's most highly developed broadband markets.

Excluding pre-sales of Residence Bel-Air, the Group EBITDA margin in the first half increased to 42 percent from 40 percent a year earlier, backed by cost savings from various strategic realignment plans and efficiency programs implemented in 2002.

Operating costs before depreciation and amortization decreased nearly 10 percent to HK$3.189 billion (US$409 million), with operating costs in TSS falling to HK$2.251 billion (US$289 million). The EBITDA margin in TSS rose to 51 percent from 49 percent a year earlier.

Revenue in the Telecommunications Services division fell 8 percent to HK$8.386 billion (US$1.075 billion) from HK$9.105 billion (US$1.167 billion), mainly due to a reduction in the overall number of direct exchange lines in service in Hong Kong and significant downward pricing pressure on the traditional local data and international telecommunications markets.

Despite difficult economic and regulatory dynamics in the telecoms market, PCCW saw reduced churn rates in the first half of 2003. This was the case particularly in the business sector where the churn was down 16 percent. Given the strong uptake for the new generation fixed-line services, the Company fully anticipates churn rates to fall further.

The Group recorded a profit attributable to shareholders of HK$703 million (US$90 million) for the six months, compared with a restated loss of HK$448 million (US$57 million) for the same period in 2002. Results in the prior year included an accounting loss on disposal of the Group's 40 percent interest in its Regional Wireless Company venture with Telstra Corp Ltd. The previous year's loss was restated from the original HK$713 million (US$91 million) to HK$448 million (US$57 million) because of a change in accounting standards under the Hong Kong GAAP in 2002.

Reach Ltd, a 50:50 venture with Telstra, recorded a fall in EBITDA in the first half to HK$289 million (US$37 million) from HK$1.632 billion (US$209 million) a year earlier. Due to this dramatic reduction in EBITDA, Reach recorded a loss before tax and PCCW's share of this loss was HK$385 million (US$49 million).

Reach remains a leader in the Asia and trans-Pacific markets, serving PCCW, Telstra and numerous other carriers. However, Reach's results were affected by ongoing pricing pressure and excess capacity in the undersea and long haul telecommunications markets.

In April 2003, Reach and its bankers restructured the terms of the company's existing US$1.5 billion syndicated term loan facility, now US$ 1.2 billion, in order to provide greater financial flexibility and an improved capital structure. The new management has also substantially overhauled the operations of Reach.

PCCW continues to pursue its goals of reducing debt and achieving desired "A" credit ratings for its wholly owned subsidiary, PCCW-HKT Telephone Limited. Subsequent to June 30, 2003, the Group prepaid HK$13.08 billion (US$1.677 billion) of gross long-term debt using internal cash resources and net proceeds from the share placement completed in July 2003.

Recurring operating cash flow after interest, taxes, capital expenditure, and investment in Cyberport increased to HK$446 million (US$57 million) from HK$9 million (US$1 million) a year earlier.

"The Group operating cash flow is strong and our debt still continues to fall. Our margins are up again, and our operating costs are dramatically reduced. Our new product and services innovation is producing strong results with improved customer retention and win-back rates. The restructuring and reorganization of the past is serving us well. The future looks better now than it has for some time," said Mr. Butcher.

2003 Interim Results Announcement
Speech by Jack C.K. So, Deputy Chairman and Group Managing Director
[ Download pdf - 49.3KB ]

2003 Interim Results Announcement
Speech by Mike Butcher, Chief Operating Officer
[ Download pdf - 39.6KB ]

Interim Results - Analyst Presentation
[ Download pdf - 794KB ]

Interim Report
[ Download pdf - 812KB ]

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 www.pccw.com

For media inquiries, please call:
Joan Wagner
Corporate Communications
Tel: (852) 2514-8883
Email: joan.wagner@pccw.com

For investor inquiries, please call:
Erik Floyd / Lisa Cheong
Investor Relations
Tel: (852) 2514-5084
Email: ir@pccw.com