Pccw Limited · HKEX:8
Pccw — FY2003 Earnings Presentation
50 slides from Pccw's earnings presentation, Mar 4, 2004
Slide 1: A Year of Innovation: Annual Results 2003
A Year of Innovation Annual Results For the year ended December 31, 2003 Hong Kong, March 4, 2004 0
Slide 2: Forward Looking Statements
Forward Looking Statements The statements included in this presentation that are not historical in nature are “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933 as amended and Section 21E of the U.S. Securities Exchange Act of 1934 as amended. These for
Slide 3: Overview
Overview Jack So Deputy Chairman & Group Managing Director 2
Slide 4: Company Focus in 2003
Company Focus in 2003 • Stabilizing the core business • Revitalizing our offer to the market • Improving the Company's financial position • Pressing for reform of out-dated regulation • Expanding business beyond Hong Kong 3
Slide 5: A Year of Substantial Achievement
A Year of Substantial Achievement Innovative • New Generation Fixed-line Services Services y now Broadband TV Launched y PCCW Convergence Customer- • Increased value of our core offerings driven • Marked improvements in retention rates Initiatives • Rapid growth in new services, & IT business in Chi
Slide 6: 2003 Financial Performance
2003 Financial Performance (US$ million) 2003 Change y-o-y Revenue 2,891 +12% Revenue (excl. Bel-Air) 2,364 -8% EBITDA 945 -9% EBITDA Margin (incl. Bel-Air) 33% vs. 40%(2002) EBITDA Margin (excl. Bel-Air) 40% vs. 40%(2002) Operating Profit 556 -17% One-time Charges (892) - Profit/ (Loss) (782) - for
Slide 7: One-time Charges
One-time Charges • All non-cash items • Do not affect cash flow • Will not hinder our dividend plans • US$ 892m in one-time provisions – US$ 533m against our entire stake in Reach – US$ 359m Japan, fixed assets, other intangible assets • We do not expect material impairments in 2004 & the foreseeabl
Slide 8: Dividend Policy
Dividend Policy Management remains committed to paying dividends y Significant progress made towards goals of reducing debt and achieving “A” ratings at HKTC y Technical matters need to be resolved including the reorganization of the balance sheet y This process expected to be completed by end of 20
Slide 9: Outlook
Outlook y Offer more innovative services to our customers Exploit Growth Opportunities y Continue to expand our Unihub IT business in China y Exploit our broadband expertise beyond Hong Kong - wireless broadband in UK Operating cost y Maintain strict cost control & operational efficiency Regulatory
Slide 10: Jack So's section in Chinese
(Jack So’s section in Chinese) 概 覽 副主席 兼 集團董事總經理 蘇澤光 9
Slide 11: 2003年業務重點
2003年業務重點 • 鞏固核心業務 • 推陳出新 • 改進財務狀況 • 爭取改革過時的規管政策 • 拓展香港以外業務 10
Slide 12: 2003年重大進展
2003年重大進展 推出多項 • 「新世代」固網電話服務 y now 寬頻電視 創新服務 y PCCW Convergence • 提升核心業務價值 貫徹以客為尊 • 大幅減低傳統電話服務客戶流失 策略 • 新服務以及內地的資訊科技業務取得增長 • 貝沙灣第一及第二期全部售出 提升現金流量 • 毋須再為項目注資 • 現金流量穩健 • 債務淨額下降 4.85億美元 進一步減債 • 大部分債務轉為定息貸款 • 債務的平均還款期延長至約 7 年 11
Slide 13: 2003年財務業績
2003年財務業績 2003年 與去年同期比較 (百萬美元) 收益 2,891 +12% 收益 (未計貝沙灣) 2,364 -8% EBITDA 945 -9% EBITDA邊際利潤 (計入貝沙灣) 33% vs. 40%(2002) EBITDA邊際利潤(未計貝沙灣) 40% vs. 40%(2002) 營業溢利 556 -17% 一次過撥備 (892) - 本年度股東應佔 溢利／(虧損) (782) - 債務淨額 3,735 -11% 12
Slide 14: 一次過撥備
一次過撥備 • 並非現金項目 • 不會影響穩健現金流量 • 不會妨礙派發股息目標 • 一次過撥備8.92億美元 – 於恆通的 5.33 億美元投資全數減值 – 日本遊戲業務、網絡固定資產、其他無形資產減值 3.59 億美元 • 預期於2004年以至可見未來，不會再有重大的 撥備 13
Slide 15: 派息政策
派息政策 管理層致力令公司派發股息 y 在 (一) 減債，及 (二) 令香港電話公司邁向「A」級信貸評級； 兩個方面取得莫大進展 y 著手解決因派發股息而涉及的技術問題，包括重整資產 負債表 y 預期2004年年底可完成這項程序 14
Slide 16: 展望未來
展望未來 y 推出更多創新服務 拓展業務 y 拓展「優創」在內地的資訊科技業務 y 應用我們在香港開發寬頻技術的經驗，在英國拓展無線 寬頻業務 提升營運效益 y 貫徹嚴謹的成本控制措施，提升營運效益 爭取改革規管政策 y 繼續向政府爭取改革過時的規管政策，以免競爭能力受 到不公平限制 償還債務 y 繼續減債，並加強公司的財務靈活度 致力令公司及早派發股息 15
Slide 17: Financial Review
Financial Review Alex Arena Executive Director & Group Chief Financial Officer 16
Slide 18: Financial Highlights
Financial Highlights Group Ex Bel-Air Revenue US$2,891m (+12%) US$2,364m (-8%) EBITDA US$945m (-9%) US$944m (-9%) EBITDA Margin 33% 40% Recurring Operating US$184m (+59%) Cash Flow (1) Net debt US$3,735m (Reduced by 11%) (1) After investment in Cyberport but before non-recurring items 17
Slide 19: Summary P&L
Summary P&L (US$m) 2002 2003 Turnover 2,578 2,891 Operating profit before net gains on 668 556 investments & one-time charges Gains on investments, net 2 52 Provision for impairment & restructuring costs (109) (320) Profit from operations 561 288 Finance costs, net (256) (271) Share of results of as
Slide 20: One-time Charges
One-time Charges (US$m) 2003 Provision for Impairment Loss on Assets & Restructuring Costs: − Obsolete Fixed Assets 150 − Multimedia Business Related Assets 49 − Game Business Related Assets in Japan 114 − Other Provisions & Restructuring costs 7 320 Impairment Loss on JVs and Associates : − Reach 5
Slide 21: REACH Results
REACH Results (US$m) 2002* 2003* Revenue 1,263 902 EBITDA 423 94 Profit / (Loss) Before Tax 189 (215) Share of REACH’s operating results 95 (105) * The amounts are presented in accordance with HK GAAP. FY 2003 figures are unaudited • PCCW still puts nearly 100% of its international traffic through R
Slide 22: Impairment Provision for REACH
Impairment Provision for REACH (US$m) Book Carrying Value Goodwill Total Investment Balance as at Dec 31, 2002 461 40 501 Equity pick up for the year (post tax) (114) 0 (114) Capacity Prepayment (with Interest) 146 0 146 Impairment Provision made in 2003 (493) (40) (533) Investment Balance as at Dec
Slide 23: Profit before One-time charges & REACH
Profit before One-time charges & REACH (US$m) 2002 2003 Reported Net Loss (995) (782) Adjusted for: One-time charges (1,352) (892) Share of REACH’s operating results 95 (105) Net Profit Before One-time Charges 262 215 and REACH 22
Slide 24: Group Cash Flow
Group Cash Flow (US$m) Core Operating Cash Flow* 606 Capex 504 Cyberport Investment +59% Operating Cash Flow After Investment in Cyberport 116 184 -69 -207 -283 -251 2002 2003 Future cash flow: y Target US$100m –120m cash back from Cyberport in 2004 y Capex at similar level y Expect continued strong
Slide 25: Improving Credit Fundamentals
Improving Credit Fundamentals 7.8 Debt/EBITDA(1) Net Debt 6.5 5.7 5.1 5.6 4.7 (US$m) 4.1 3.4 3.4 3.4 3.1 6,000 2.1 5,176 5,039 5,000 4,430 H1’01 H2’01 H1’02 H2’02 H1’03 H2’03 H1’01 H2’01 H1’02 H2’02 H1’03 H2’03 901 1319 4,220 4,280 639 4,000 592 1304 3,735 3,000 1661 4275 3720 3791 2,000 3628 2976 E
Slide 26: Improving Debt Profile
Improving Debt Profile (US$m) $1,154 $1,000 $54 $956 $450 $359 $456 $1,100 $77 $500 $250 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2031 (See appendix for detailed legend) Debt Profile Recent Events y No short-term debt y Prepaid total US$617m in Q1 ‘04 y Average maturity 7 years y Drew
Slide 27: Cyberport - Residence Bel-Air
Cyberport - Residence Bel-Air Robert Lee Executive Director & Chairman of PCCW Infrastructure 26
Slide 28: Continued Success of Residence Bel-Air Sales
Continued Success of Residence Bel-Air Sales Sales Update y All of phases 1 & 2 (1204 units) were sold y US$1.25 b (average > US$1 m per unit) Sales Achieved y 1.9 Million Sq. Ft. of Real Estate y US$ 568m Total Investment y 2003 US$ 69m Pricing y Above breakeven point Strong sales of Bel-Air suffic
Slide 29: Positive Outlook for Phase 3 Sales and beyond
Positive Outlook for Phase 3 Sales and beyond y Strong property market sentiment HK Property Market y Limited supply of new luxury flats on Hong Kong Island y No future cash investment required from Positive Cash Flow PCCW y Expect to recoup approx. US$100-120 m cash by Dec 2004 Future Sales Target
Slide 30: Operational & Strategic Review
Operational & Strategic Review Mike Butcher Executive Director & Chief Operating Officer 29
Slide 31: Defend Innovate Grow
2003 - Operating Strategy Review Year of Innovation Aggressively defended market share Defend y Innovative new products & services y Regulatory initiatives New products & services Innovate New Generation Fixed Line Services PCCW Convergence Grow 30
Slide 32: PCCW Innovations Protect Customer Base & Drive Growth
PCCW Innovations Protect Customer Base & Drive Growth We will continue to Innovate in our core businesses Advanced NGFL Multimedia Applications New VAS PCCW Convergence New Generation Fixed Line Services July August November 2003 2004 Setting New Standards in Value Differentiation 31
Slide 33: NGFL Services
NGFL Services Sign-up rate exceeds all expectations 1,000 (‘000) y Rapid adoption of new technology New Generation Fixed Lines 655 600 y 655,000 customers selected NGFL 520 Services in less than 6 months 451 340 – Targeting 50% NGFL penetration by YE2004 154 y More premium services in 2004 • SMS pho
Slide 34: NGFL Services
NGFL Services Our new cordless SMS phone y Same capabilities as wired SMS phones – SMS sending/ receiving – Interactive download of information services – Personal Assistant Service short-cut key y Additional new features – Predictive English & Chinese text input – 4-chord polyphonic ring tone y Mor
Slide 35: Improved Customer Retention
Improved Customer Retention Market dynamics after NGFL launch Average -25% Monthly Net H2 vs. H NGFL at Our Innovative products Quarter-end Line Loss 1 widely accepted 40,000 Net Line Loss NGFL 700,000 y Customer loyalty increasing 30,000 y Customer winback rising 20,000 350,000 10,000 0 0 Q1 Q2 Q3
Slide 36: Broadband - A Growth Engine
Broadband - A Growth Engine Broadband customers (‘000) y Strong customer growth - revenue Wholesale y -o-y rising from broadband access & % Business +26 VAS services Retail Consumer * now Broadband TV 703 y More reasons to use our broadband 559 – 63 402 52 – 25M VDSL service offering in Q1 2004 will
Slide 37: Strong sign-up continues as channels & offerings grow
Strong sign-up continues as channels & offerings grow New NETVIGATOR customers 480,000 hs 96,000 mont y 4 i n onl e d up sign 0 5,000 205,000 Targeting HK$150 2 per month content 41,000 ARPU at YE 2004 58,000 Sep-03 Dec-03 Dec-04F Important New Revenue Stream in 2004 36
Slide 38: Platform for Quality Pay-TV
Platform for Quality Pay-TV 23 channels at launch 7 more since launch Football • French League • Spanish FA Cup • Italian FA Cup • German FA Cup • UEFA Cup (new content) A la Carte Menu Allows Customers to Choose Their 37 Own Package of Favorite Channels
Slide 39: Announcing New Channels
Announcing New Channels nar PoCw SARmH
Slide 40: New Channels Announced
New Channels Announced Providing 34 Video and 15 Audio Music Channels - More Popular Content Will Arrive During 2004 39
Slide 41: UK Wireless Broadband
UK Wireless Broadband y Won 13 of 15 licenses 1 y Acquired last two licenses A H y Own nationwide license 3.4 GHz 2 B 3 C band of the radio spectrum D 4 – PCCW now has 100% UK footprint E 6 5 – No roll out obligations F G 7 Soft Launch on Schedule 40
Slide 42: UK Wireless Broadband
UK Wireless Broadband y Company named 1 y Soft launch in Q2 2004 A H 2 B y wireless broadband 3 C service to be launched 4 D E 6 5 y Seamless back-end support F 7 G based in HK Bringing Proven NETVIGATOR Services to 41 a New Market
Slide 43: Huge Market Potential
Huge Market Potential HK UK UK 50% y 2003 UK broadband penetration only 11% 13.5 million Broadband subscribers & household penetration • UK expected to add 2.1 million new broadband subscribers in 2004 - Double the total Hong Kong market 11% 55% 2.8 million y UK forecast 13.5 million broadband 1.2 m
Slide 44: Outlook
Outlook y Offer more innovative services to our customers Exploit Growth Opportunities y Continue to expand our Unihub IT business in China y Exploit our broadband expertise beyond Hong Kong - wireless broadband in UK Operating cost y Maintain strict cost control & operational efficiency Regulatory
Slide 45: Q&A
Q:aA oa PCCW SAR
Slide 46: Appendix
Appendix Bi fF
Slide 47: PCCW Consolidated Debt Maturity Profile
US$m PCCW Consolidated Debt Maturity Profile 1 2 Feb 2001 $2,300 Debt to EBITDA = (6,550 / 790) = 8.29X $1,500 $1,475 $375 $900 $375 $1,100 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2031 $1,475 $1,991 3 Dec 2001 Debt to EBITDA = (6,138 / 948) = 6.47X $375 $900 $1,000 $1,100 $375 $250 20
Slide 48: HKTC Debt Maturity Profile
US$m HKTC Debt Maturity Profile 1 $2,300 HKTC Debt to EBITDA = (4,700 / 1,123) = 4.19X $1,500 Feb 2001 $900 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2031 $1,991 HKTC Debt to EBITDA = (4,141 / 1,203) = 3.44X $900 $1,000 Dec 2001 $250 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201
Slide 49: Metrics
Metrics TSS Revenue TSS Operating Drivers (US$ million) 2002 2003 2002 2003 Exchange lines in service ('000) 3,138 2,779 Local Telephony Services 879 772 Business lines 1,336 1,236 (Direct Exchange Lines, interconnection, local access link Residential lines 1,802 1,543 and exchange co-location) Loca
Slide 50: Metrics
Metrics Business eSolutions (Unihub) Headcount 2002 2003 2002 2003 Retail business broadband (‘000) 52 63 TSS 8,445 8,897 (US$ million) Business eSolutions 1,280 2,229 Revenue Infrastructure 361 365 IT Business(1) 179 195 Others(1) 1,474 1,019 Business broadband 68 68 Total 11,560 12,510 Directory B