PCCW (PCW) reports in-line; property and broadband businesses strong (4Q04)

Includes: CHA, CHL, CHU, CN-OLD, PCW
by: Ezra Marbach

Hong Kong fixed-line phone operator PCCW (ticker: PCW) reported (WSJ subscription required) a
net profit of $210 million for 2004, compared to a loss of $782
million in 2003. Revenue was bolstered by PCW's property and broadband services. But the company's core phone business continued to decline.

2004 Results:
(all percentage changes and comparisons are year on year, unless stated otherwise)

  • Revenue increased 1.5% to $2.94 billion.
  • Revenue from telecom services fell 8.1%; revenue from property sales was $692 million.
  • Net profit was $210 million, compared with a loss of $782 million.
  • Net profit results were in-line with consensus expectations.
  • The company proposed a dividend of $0.012.
  • The company said it cut its net debt
    by 10% to $3.36 billion.
  • Strong results arose from the company's property operations, broadband
    Internet and broadband television businesses.
  • PCW is losing about 6,000 phone lines a
    month, compared with more than 25,000 per month in the middle of 2003.

Key points:

  • The company is continuing discussions with China Netcom (ticker: CN), which recently acquired a 20% stake in PCW.
  • PCW intends to acquire a
    stake of no more than 49% in Netcom's broadband unit.
  • The companies will jointly roll out broadband
    service in six southern China cities, including Hangzhou, Ningbo,
    Wenzhou, Yangzhou, Chongqing and Chengdu.
  • PCW and CN will also
    develop a yellow pages business by developing a multimedia platform to
    promote business in both mainland China and Hong Kong through print,
    Web-based and mobile short text messages.
  • PCW and China Netcom will also collaborate on real-estate deals.

Key statistics:

  • At end of 2004,
    361,000 customers had installed PCW's broadband-TV service, called Now
  • 53% of TV customers were paying for premium channels.
  • The
    remaining 47% received basic Now TV free when they signed up and paid for a
    PCW broadband-Internet service, called Netvigator.
  • The company said its fixed-line market share is about 68%, down from 73% at the end of 2003, and 82% at the end of 2002.

PCW's stock market performance: