Hong Kong-based PCCW [0008.HK] has posted a loss of HKD7.76 billion (USD995 million) for the year to 31 December 2002, having written down the value of its investment in Reach – its undersea cable joint venture with Australia’s Telstra – to the tune of HKD8.26 billion (USD1.06 billion). The group reported a HKD1.34 billion profit in 2001. Turnover fell slightly year-on-year from HKD21.96 billion to HKD20.11 billion, but operating profit before net gains on investments, provision for impairment losses and restructuring costs increased by 9% to HKD5.21 billion. EBITDA was up 10% to HKD8.12 billion while the group’s EBITDA margin rose by six percentage points to 40%. PCCW chairman Richard Li has blamed the uncertain political and economic climate worldwide for his company’s decision not to pay a dividend in 2004, as it had previously aimed to do. He added that the firm still planned to pay a dividend in the medium term, but debt reductions would have to come first; net debt fell from HKD39.31 billion to HKD32.92 billion during 2002.
The bulk of the group’s revenue (89.5%, or HKD18.01 billion) was generated by its Telecommunications Services division, which includes Hong Kong’s leading provider of integrated communications services PCCW-HKT. The company, formerly known as Hongkong Telecom, was acquired from UK-based Cable & Wireless in February 2000 and his since been rebranded. In mid-2002 PCCW-HKT had 3.35 million local access lines in service, equivalent to 87% of the total market. By the end of the year, according to the regulator Ofta, PCCW-HKT’s 3.14 million direct exchange lines gave it a total market share of 82%. The decline in the number of PCCW’s fixed lines is mirrored in the market as a whole, as an influx of broadband providers battle to steal market share, while the popularity of wireless services continues to take its toll. In addition, PCCW-HKT is facing increasingly fierce competition from alternative players keen to take a slice of the basic telephony market.