PCCW’s profit falls 21%, EBITDA up 3%, MD replaced

29 Mar 2007

Hong Kong telecoms group PCCW’s net profit fell by over 21% year-on-year in 2006 to HKD1.25 billion (USD160 million) as the company booked lower net investment and other gains during the year, it said in a statement. PCCW posted gains of just HKD42 million last year compared to HKD626 million in 2005. It noted that the sale of a 79.72% stake in Japanese game developer Jaleco Ltd in 2005 drove up investment gains that year. The firm also said that the 2006 net gain was capped by losses on legal claims and net losses on cross-currency swap contracts. Revenue for 2006 stood at HKD25.64 billion, up from HKD22.5 billion a year earlier, mainly on the back of higher sales at its housing development division and increased contributions from its mobile and broadband businesses. EBITDA was HKD6.83 billion, up 3% from 2005, although the EBITDA margin narrowed by three percentage points to 27% as its television and content unit (which includes NOW broadband TV services) recorded a loss of HKD336 million before interest, tax, deprecation and amortisation, widening from a HKD278 million loss a year before. TV and content business reported a 71% increase in revenue, mainly because of contributions from NOW TV.

NOW broadband TV customers reached 758,000 last year, 501,000 of which accounted for an average revenue per user of HKD140 a month, up 23% from the year-earlier figure of HKD114. The company has given away free NOW TV connections to promote its broadband internet services. PCCW said its fixed line telephony business recorded stable annual revenues of HKD15 billion, despite pricing pressure due to fierce competition in the sector. It claimed that its domestic fixed line market share at the end of December stood at 66% of residential lines and 69% of business connections. PCCW’s mobile business, which includes Sunday Communications following its acquisition last year, reported turnover of HKD1.2 billion backed by a growing 3G customer base. The unit however recorded an LBITDA of HKD186 million for the year against a year-before EBITDA of HKD25 million as competition and aggressive marketing eroded earnings.

PCCW said its results have yet to reflect the synergies in its fixed line, broadband, mobile and TV business units. ’As we are still in the investment stage, the 2006 results do not fully reflect the potential of the synergies. Much of the benefits from such investments will come in future years,’ its statement read.

It has also been reported that PCCW Group Managing Director Jack So has left his post. So resigned for ‘personal reasons’, Chief Financial Officer Alex Arena said at a Hong Kong press conference. Controlling shareholder Richard Li brought in So to run PCCW in June 2003, after a share price plunge that wiped out more than 95% of the company’s market value. The former chairman of railway operator MTR Corp failed to stem a decline in telephony revenues though, whilst PCCW was thwarted in its ambitions to expand into mainland China. During So’s stint as MD, PCCW’s shares have fallen 8%, while MTR’s stock has more than doubled. Arena will replace So, while Group Finance Director Susanna Hui will take over as Chief Financial Officer.