PCCW posts disappointing first half profits

15 Sep 2006

Hong Kong’s largest telco PCCW has posted a 17% year-on-year drop in first-half profits which it attributed to a lack of one-time gains to match earnings last year from currency swaps and other investments. Six-month net income was HKD796 million (USD136 million), compared with HKD954 million a year earlier (including a one-time gain of HKD545 million), whilst revenues rose to HKD14.12 billion from HKD11.7 billion. According to the median estimate of five analysts polled by Bloomberg, the company was expected to report profits of HKD865 million. PCCW’s fixed line subscriber base grew 1% year-on-year to 2.58 million at the end of June, compared to a 2% decline in the first six months of 2005, although the number of new lines gained slowed from 50,000 in the last six months of 2005 to 15,000 in 1H 2006. ‘The slowing line growth is intentional as we try to get higher average revenue per user from the business. We are not too worried as our focus is profitability,’ said Jack So, deputy chairman and group managing director; the increase in traditional telephony lines in 2H 2005 was largely attributed to PCCW’s price cuts. Its number of broadband lines stood at 998,000 at end-June 2006, including wholesale connections, whilst the number of subscribers to its NOW Broadband TV service rose 38% year-on-year to 608,000, of which 73% were paying customers (the remainder received the service free for subscribing to internet services); NOW ARPU increased to HKD118 from HK100 in 1H 2005. Despite the subscriber increases and a 66% rise in pay-TV turnover to HKD303 million, EBITDA loss at NOW Broadband rose to HKD186 million, compared with HKD116 million a year ago. PCCW said it wants NOW to be EBITDA profitable by the end of this year. The group’s wireless division, PCCW Mobile (Sunday Communications), reported that its net loss widened to HKD270.5 million in the first half, compared with HKD49.2 million a year ago, as the launch of its 3G business this year caused operating costs to skyrocket.

Hong Kong, HKT (incl. CSL), PCCW Group