PCCW reports Interim results for 2006

  • Continued recovery of core telecoms business
  • Significant growth of now TV
  • Sustained innovation in TV, broadband and mobile
  • Growth of other new businesses
  • Consolidated revenue up 21% at HK$14,124 million
  • Consolidated EBITDA up 13% at HK$3,652 million
  • Basic earnings per share 11.83 HK cents
  • Interim dividend 6.5 HK cents per share

HONG KONG, Sept 14, 2006 - PCCW Limited today announced positive results for the first half of 2006, reflecting a continued recovery in its core business as well as significant growth in its pay TV operations and an increased contribution from its property subsidiary.

Sustained innovation in TV, broadband and mobile during the past six months set the foundations for further growth in the future, while sizeable contracts won by subsidiaries PCCW Solutions and CASCADE showed the Company's strategy to develop new revenue sources from traditional support services had begun to pay off.

The Board recommended an interim dividend of 6.5 HK cents per share, subject to approval by shareholders.

Deputy Chairman and Group Managing Director Jack So said: "Now that we have successfully stabilized the core telecommunications business, we are focusing on building new revenue streams, including from TV and content, mobile, CASCADE, and PCCW Solutions."

The core telecommunications business delivered stable financial results in a steadily improving business environment. PCCW achieved a further net line gain of 15,000, on top of the 50,000 fixed lines added in the second half of 2005. The total number of telephone lines in service at the end of June 2006 was approximately 2,579,000, up 1 percent from the end of 2005, and the Company's market share remained stable at 68 percent.

Total broadband access lines in service reached approximately 998,000 by the end of June 2006, up 5 percent from 953,000 at the end of December 2005, as high-quality value-added services including now TV and on-line music streaming service MOOV encouraged customer loyalty.

Group revenue rose 21 percent in the first half to HK$14,124 million and group EBITDA increased 13 percent to HK$3,652 million, largely due to the higher booking of Bel-Air sales and the inclusion of SUNDAY's consolidated results in the first half of 2006. Excluding the Group's property business, Pacific Century Premium Developments Ltd (PCPD) and SUNDAY's results, the financial performance of PCCW's telecommunications business was relatively stable.

Group net profit attributable to shareholders was HK$796 million, down 17 per cent, primarily due to lower investment gains. Excluding such impact, attributable profit would have increased.

Basic earnings per share amounted to 11.83 Hong Kong cents.

Revenue in the TV & Content business segment surged 66 percent to HK$303 million in the first half of 2006, driven by the growth of now TV.

now TV remains the largest of its kind in the world and the envy of the IPTV industry, as the number of installed services continues to grow, reaching 608,000 by the end of June 2006, up 38 percent from a year earlier. The proportion of customers paying for channels rose to 73 percent from 61 percent, and their ARPU increased to HK$118 from HK$110. More local, international and sports content has been added, including Cantonese-language now Business News Channel, the TVB PAY VISION pack, and extended programming from HBO and ESPN STAR Sports, featuring exclusive live coverage of the UEFA Champions League.

More interactive features were introduced including the now game channel, and now shop. The now shop channel, a new online interactive shopping experience, was soft-launched on August 16, offering a growing array of products and services, including DVDs, real time stock quotes, and on-line cinema tickets.

"now TV has rapidly become one of the largest pay TV services in Hong Kong, as viewers have been attracted to the increasingly rich content and the unique interactive features. The Group is optimistic about continued growth," said Mr. So.

June 2006 marked the first anniversary of the acquisition of SUNDAY by PCCW. PCCW mobile's 3G trial, launched in January 2006, has proven a success in quickly adding a large number of test users to the network. The Group has begun migrating 3G trial users to various pricing packages. The testing and building out of SUNDAY'S 3G network has been substantially completed. SUNDAY also continued to upgrade its existing 2G/2.5G network, adding more cell sites to enhance network coverage and service quality.

In May 2006, PCCW mobile introduced the world's first real-time, mobile TV service using Cell Multimedia Broadcast technology developed by Huawei Technologies. The service offers continuous broadcast feeds of TV programming with one-click access. Initial program offerings include now Business News Channel, 24-hour ATV News, CNN International, CNBC, and Mobile ESPN.

"Leveraging on the Group's quadruple play advantage, we will integrate more now TV content into our 3G mobile services," Mr. So said.

The Group's ICT services arm, PCCW Solutions, continued to expand its external business and was awarded significant contracts despite the challenging business environment.

Major contracts won recently included high-profile public-sector projects such as the 10-year contract for the Electronic Passport System (e-Pass), and the Government Financial Management Information System (GFMIS) contract, both with the Hong Kong Government.

In the private sector, a contract with Bossini International Holdings Limited was also signed to manage its new Oracle Financial system rollout in the region, and provide comprehensive implementation services.

PCCW's network management subsidiary CASCADE continued to build its external business during the first half of 2006. It was awarded significant overseas projects for network-operation outsourcing and consultancy in Indonesia, Vietnam and mainland China. CASCADE also successfully implemented an IPTV service for True Internet, the largest broadband operator in Thailand.

Revenue from the Group's Contact Center business increased as the outsourcing model became increasingly popular with Hong Kong and multinational corporations.

Property development subsidiary Pacific Century Premium Developments Ltd (PCPD) saw revenue rise 58 percent to HK$5,276 million and EBITDA more than double to HK$708 million in the first half of 2006, as the prestigious Bel-Air residential project continued to deliver good results.

In mainland China, the alliance with China Netcom Group continues to strengthen.

PCCW has signed the Sale and Purchase Agreement with China Netcom for the acquisition of a 50 percent stake in China Netcom Broadband Corporation Limited, which provides broadband access and value added services in the cities of Hangzhou and Ningbo, and approval for the restructuring of CNCBB was obtained. Pending approval from the Ministry of Information Industry (MII), PCCW will soon sign a 50-50 joint venture agreement with China Netcom.

CASCADE will provide IPTV consultancy services to China Netcom, including network and system design and build. Discussions continue on the possibility of setting up a joint venture between China Netcom, PCCW and other strategic partners to provide IPTV services.

Discussions are progressing on the possibility of forming a joint venture with China Netcom and other strategic partners to operate Internet and printed directories businesses in mainland China.

PCCW Group and China Netcom Group are moving forward with the Hujialou (呼家樓) development in the central Chaoyang district of Beijing. A technical and traffic analysis of the site has been completed and the site development scheme finalised, including modification of the original China Netcom telephone exchange. The scheme has been presented to the Beijing Municipal Government, which has started the approval process. Joint feasibility studies on other potential development sites in China Netcom Group's portfolio are under way. A study of a site at Dongsi, in the central Beijing area, has been completed.

PCCW has agreed to jointly develop new data center services with China Netcom in Guangdong. This data center service would support PCCW customers in Southern China and also support the research and development initiatives of PCCW Solutions. "We look forward with optimism to the second half of 2006 and beyond, as the strengthened financial position and stabilization of the core business has laid a firm foundation for the future," said Mr. So.

Webcast of 2006 Interim Results Announcement
- Broadband
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2006 Interim Results Presentation [pdf - 2.04MB]

2006 Interim Results Announcement [pdf - 604KB]

Statement from the Deputy Chairman and Group Managing Director [pdf - 44KB]

About PCCW

PCCW Limited (SEHK: 0008, NYSE ADR: PCW) is the premier telecommunications provider in Hong Kong and a leader in Information and Communications Technologies in Asia. While expanding opportunities in mainland China in partnership with China Network Communications Group Corporation, PCCW continues to enhance Hong Kong's role as a regional center of technological excellence through innovative services in new generation fixed-line and mobile telephony, broadband, information technology, wireless communications, and IPTV (through its successful now TV network operated by PCCW subsidiary PCCW Media Limited). Internationally, PCCW is proceeding with the phased rollout of a sophisticated wireless broadband network in the United Kingdom. PCCW also provides cutting-edge technical services to network operators worldwide. PCCW subsidiary Pacific Century Premium Developments Limited is engaged in property development.

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