PCCW reports 2004 interim results
Attributable profit up 15 percent

Profit attributable to shareholders for the six months ended June 30, 2004 increased 15 percent to HK$805 million (US$ 103 million) from HK$703 million (US$90 million) in the same period last year
Consolidated revenue remained stable at HK$10.726 billion (US$1.375 billion).
In the absence of unforeseen circumstances, the directors intend to declare an interim dividend of HK$ 0.055 per ordinary share payable in November 2004
General operating costs down 6 percent year-on-year
Net debt down 11 percent to HK$29.547 billion (US$3.788 billion) at end of June 2004 from HK$33.4 billion (US$4.3 billion) at end of June 2003
Broadband grows on successful launch of now Broadband TV, with broadband access lines up 20 percent year-on-year to 753,000.
Significant uptake of New Generation Fixed Line (NGFL) services helps stabilize line loss and boost customer retention in difficult fixed-line market.

HONG KONG, August 26, 2004 - PCCW Limited reported stable consolidated revenue and a higher attributable profit for the first six months of 2004 as a revitalized product line further strengthened its market-leading broadband business and countered competitive and regulatory pressures in the fixed-line market.

The success of now Broadband TV, PCCW's a la carte pay-TV service for broadband subscribers, has substantially boosted the market size and share of the Company's Netvigator ISP. At the same time, the introduction of New Generation Fixed Line (NGFL) services has significantly improved customer retention rates in its core telephony business.

The growth in the broadband Internet access business, together with the additional impact of strong pre-sales at the Bel-Air property development in Cyberport and increased revenue from the Unihub IT solutions business and lower operating costs, produced a solid performance in the first half. Profit attributable to shareholders for the six months ended June 30, 2004 rose 15 percent to HK$805 million (US$103 million) from HK$703 million (US$90 million) a year earlier.

Consolidated revenue remained steady at HK$10.726 billion (US$1.375 billion), with sales at Bel-Air contributing HK$2.096 billion (US$269 million) this year compared to HK$1.447 billion (US$186 million) a year ago.

"We have focused aggressively on innovating our product line in the past 12 months and the results are clear in the solid performance we have delivered in the first half of 2004," said Deputy Chairman and Group Managing Director Jack So. "With now Broadband TV supporting growth in our core broadband business, we have outperformed the market. And with the rapid uptake of our NGFL services, we have reduced churn by more than 60 percent from the same period a year earlier."

"The operating environment remains challenging, particularly in the fixed line market, but the key initiatives we have under way, coupled with the improvement in the Hong Kong economy and the ever-closer ties with the mainland, position the Company favorably for future growth," Mr. So said.

Whilst building growth opportunities, the Company has continued to maintain strict cost controls and has strengthened operating efficiency. Operating costs were cut by 6 percent year-on-year in the first half.

The Company has significantly reduced debt, with net debt at June 30, 2004 down 11 percent to HK$29.547 billion (US$3.788 billion) from HK$33.384 billion (US$4.28 billion) a year earlier, and average maturity at approximately seven years. PCCW has cut gross debt by almost two-thirds since August 2000.

The Company has also reorganized its balance sheet and addressed various technical matters to enable the payment of a dividend. In the absence of unforeseen circumstances, the directors intend to declare an interim dividend of HK$ 0.055 per ordinary share or an aggregate amount of approximately HK$ 295 million in November 2004. The proposed dividend will be distributed and funded from existing profits made on or prior to June 30, 2004 which have been reflected in the consolidated interim accounts of the Company.

"The fact that the Company is in a position to pay dividend represents a major milestone" said Mr. So.

"The innovative products introduced in the second half of 2003 have seen a dramatic uptake and this success is now feeding into the Company's results," Mr. So said.

now Broadband TV, launched in September 2003, has further enriched its content by gaining exclusive Hong Kong rights to broadcast ESPN and Star Sports. We have also created with ATV a 24-Hour Cantonese news channel. now Broadband TV subscriber numbers have already achieved critical mass, with over 316,000 customers (or nearly half of its major competitor's customer base) signing up by the end of June 2004, less than one year after launch.

This has helped PCCW's broadband services in Hong Kong continue their rapid growth. The total number of broadband access lines rose 20 percent to 753,000 at the end of June 2004 from 629,000 a year earlier. Consumer broadband grew even more rapidly to 558,000 lines from 460,000 lines a year earlier.

PCCW's New Generation Fixed Line (NGFL) services, launched in July 2003, have also seen greater than expected demand, with 849,000 lines signed up as of June 30, 2004. This has slowed average net monthly line loss by more than 60 percent since first half 2003 and helped boost customer retention in a fiercely competitive market, that has been liberalized since 1995.

Revenue in the Telecommunications Services division fell 11 percent in the first half to HK$7.496 billion (US$ 961 million) from HK$8.386 billion (US$1.075 billion) a year earlier, due to competition from other fixed-line operators and wireless telecommunications services.

PCCW has over the past year been successful in litigating against Hong Kong regulators over what it considers to be unfair restrictions on the Company's ability to compete in the fixed-line market.

"Significant progress has been made with the Government's decision to phase out Type II interconnection over four years. Management is cautiously optimistic that our non-dominance applications will receive favorable review during the remainder of 2004," said Mr. So.

Outside of Hong Kong, PCCW's wholly owned subsidiary UK Broadband has soft launched a high-speed wireless broadband service in the Thames Valley to the west of London, with encouraging results, and is studying plans for a wider roll-out in the UK.

The Group will also continue to actively increase its presence in mainland China, through its Unihub IT solutions business and its joint venture relationships with China Telecom and Sinopec.

The Company is in an advanced stage of discussions with China Network Communications Group Corporation (China Netcom) regarding strategic and business opportunities. There is no definitive agreement as yet.

The recent increase in Hong Kong property prices has greatly benefited the Company through its role as developer of Cyberport. PCCW's separately listed subsidiary, Pacific Century Premium Developments Limited, responsible for the successful sales achieved at Bel-Air, continues to contribute significantly to revenue and cash flow. Earlier this month, the first portion of surplus proceeds, totaling HK$2.595 billion, was allocated to the Government and PCCW in respective 64.5 percent and 35.5 percent shares. PCCW's share was approximately HK$920 million (approximately US$ 118 million).

About PCCW

PCCW Limited (SEHK: 0008, ADR-NYSE: PCW) is the largest communications provider in Hong Kong and one of Asia's leading IT&T players. Hong Kong's image as a center of technology excellence continues to be enhanced by PCCW's innovation, especially in new generation fixed-line telephony, broadband, IT, wireless and delivery of home entertainment. Internationally, PCCW provides cutting-edge technical services to network operators, and enables organizations to bring their business to Asia and take Asian business to the rest of the world. The Company's English name was changed in 2002 from "Pacific Century CyberWorks Limited" to "PCCW Limited".

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