Pccw Limited · HKEX:8
Pccw — H1 2010 Earnings Presentation
49 slides from Pccw's earnings presentation, Aug 13, 2010
Slide 1: 2010 Interim Results
2010 Interim Results For the period ended June 30, 2010 August 13, 2010 - Hong Kong 0
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may contain "forward-looking statements" that are not historical in nature. These forward-looking statements, which include, without limitation, statements regarding PCCW's future results of operations, financial condition or business prospects, are based
Slide 3: Overview
Overview Alex Arena Group Managing Director 2
Slide 4: 2010 H1 Financial Performance
2010 H1 Financial Performance (US$ million) Core Business* Consolidated H1’09 H1’10 % change H1’09 H1’10 % change Revenue 1,342 1,376 + 3% 1,638 1,513 - 8% EBITDA 421 432 + 3% 460 477 + 4% Profit Attributable to Equity Holders 84 98 + 17% The Board Has Declared an Interim Dividend of 5.10 HK Cents P
Slide 5: 2010 H1 Dividend Yield
2010 H1 Dividend Yield Total Dividend Yield Interim Dividend yield Special 6.00% dividend: 3.91% 4.40% $1.30 per 3.66% 3.52% share distributed in May 2009 1.14% 1.26% 1.31% 1.36% 1.46% 1.83% 2004 2005 2006 2007 2008 2009 2010 DPS (HK$) Interim $0.055 $0.065 $0.065 $0.065 $0.070 $ - $0.051 Final $0.0
Slide 6: 2010 H1 Dividend Payout Ratio
2010 H1 Dividend Payout Ratio 100% 90% 74% Interim Special dividend: payout ratio: $1.30 per 60% 52% share 45% distributed in May 2009 Interim payout ratio: 72% 2004 2005 2006 2007 2008 2009 H1’10 DPS (HK$) Interim $0.055 $0.065 $0.065 $0.065 $0.070 $ - $0.051 Final $0.096 $0.120 $0.120 $0.135 $ - $
Slide 7: Financial Review
Financial Review Susanna Hui Group Chief Financial Officer 6
Slide 8: Improved Group Performance as Core Business Resumes Growth
Improved Group Performance as Core Business Resumes Growth (US$ million) Core Business* PCPD Revenue EBITDA 3 % 3 % Core + Core + 1,342 1,376 421 432 Core 31% 31% EBITDA Margin 296 137 39 45 H1’09 H1’10 H1’09 H1’10 y Core revenue further improved on resilient results last year y EBITDA of both core
Slide 9: Solid Profit Growth for Shareholders
Solid Profit Growth for Shareholders (US$ million) a fl Core Business* 98 Earnings Per Share El PCPD 84 —— 11.30 HK cents (H1'09: 9.66 HK cents) H1'09 H1'10 * Core business includes telecom, media and ICT businesses 8 ONLY PCCW
Slide 10: Revenue Growth in All Four Segments with Uplift in Core EBITDA
Revenue Growth in All Four Segments with Uplift in Core EBITDA (US$ million) Core Revenue Core EBITDA + 3% + 3% 1,342 1,376 421 432 TSS Mobile TV & Content 1,057 1,067 + 1% PCCW Solutions 436 Steady 439 Other Businesses Eliminations 106 107 + 1% 140 151 + 8% + 17% 17 19 + 22% 11 6 13 116 3 139 + 20%
Slide 11: Solid TSS Performance Continues to Provide Steady Cash Flow
Solid TSS Performance Continues to Provide Steady Cash Flow (US$ million) ‘ ) TSS EBITDA 439 436 Broadband Network Local Data International EBITDA 42% 41% Others Margin Local Telephony H1709 H110 H1’09 H1710 Broadband revenue up 7% y-o-y despite severe competition , , Local data and International al
Slide 12: Strong PCCW mobile EBITDA Growth
Strong PCCW mobile EBITDA Growth (US$ million) Mobile Revenue Mobile EBITDA + 1% + 17% 19 106 107 17 EBITDA 16% 18% Margin H1’09 H1’10 H1'09 H1'10 y Remarkable EBITDA growth as business y 29% y-o-y growth in 3G customers with higher focuses on high-end customers to value-added service usage more tha
Slide 13: TV & Content Continues Robust Growth Momentum
TV & Content Continues Robust Growth Momentum (US$ million) TV & Content Revenue TV & Content EBITDA + 8% 151 140 6 EBITDA 4% Margin -3% (4) H1’09 H1’10 H1'09 H1'10 y Increased EBITDA contribution after achieving positive EBITDA in H2’09 y Market leadership reinforced with customers growing 4% y-o-y
Slide 14: PCCW Solutions Gains from Buoyant ICT Sector in Both PRC and Hong Kong
PCCW Solutions Gains from Buoyant ICT Sector in Both PRC and Hong Kong (US$ million) PCCW Solutions Revenue PCCW Solutions EBITDA + 20% % + 22 139 13 116 11 EBITDA 9% 9% Margin H1'09 H1'10 H1’09 H1’10 y Continued revenue growth due to market y EBITDA grew in step with revenue recovery and strong per
Slide 15: Prudent Cost Management
Prudent Cost Management (US$ million) General & Administrative Expenses Core Opex to Revenue Ratio 595 574 0 0 9% S a vings Depreciation & 242 26% 241 23% Amortization 343 312 Operating expenses H1’09 H1’10 6% S a vings 353 333 y Maintained a lean, yet strong cost base for efficient ongoing operatio
Slide 16: Group Performance
Group Performance (US$ million) H1’09 H1’10 Revenue 1,638 1,513 Cost of sales (825) (703) General and administrative expenses (595) (574) Net other gains/(losses) and restructuring costs (2) 4 Average Finance costs, net (94) (102) cost of debt 4.1% Share of results of associates and JVs (4) (2) (nor
Slide 17: Demand-driven Capex (exclude PCPD)
Demand-driven Capex (exclude PCPD) (US$ million) 208 y Capex to revenue ratio maintained within guidance H2 122 y Capex commensurate with new customer demand as infrastructure already in place H1 86 87 2009 2010 H1 Capex to Revenue Ratio: 6% 6% (Core Business) 16
Slide 18: Strong & Steady Operating Cash Flow
Strong & Steady Operating Cash Flow Core Business Operating Cash Flow minus Capex* (US$ million) 653 449 + 3% 423 335 345 (at 53% level of FY2009) 2007 2008 2009 H1'09 H1'10 y Continued strong and steady operating cash flow from business recovery and prudent opex/capex management * Core Business EBI
Slide 19: Improved Debt Profile
Improved Debt Profile December 31, 2009 June 30, 2010 (US$ million) (US$ million) Long-term Revolving Credit & Term Loan Facilities Long-term Revolving Credit & Term Loan Facilities US$ Bonds US$ Bonds Gross debt: US$4,213m Gross debt: US$4,521m Net debt: US$3,681m US$150m undrawn 1,487 facility US$
Slide 20: Continued Deleveraging
Continued Deleveraging Core Business Net Debt (1) PCCW Group Net Debt(2)/EBITDA(3) (US$ million) As of June 30, 2010 3.8 3.6 3.7 (4) 3.3 2.9 4,336 4,187 H1 H2 H1 H2 H1 3,977 3,197 3,137 2008 2009 2010 HKTGH Net Debt(2)/EBITDA(3) 5.0 4.4 4.0 H1 H2 H1 H2 H1 2008 2009 2010 H1 H2 H1 2009 2010 (1) Net de
Slide 21: Business Review
Business Review Alex Arena Group Managing Director 20
Slide 22: PCCW Fixed Line, Broadband, Mobile
Fixed line aa Pall PCCW Fixed Line wa! / now. ra 36 4 eee eyes, Broadband Mobile 4 cl < = MILI
Slide 23: Stable Fixed-line Business
Stable Fixed-line Business Solid Customer Base Maintained Since 2004 (‘000) Residential Lines Business Lines 1,667 1,543 1,487 1,423 1,403 1,407 1,407 1,407 1,408 1,408 1,407 1,406 1,407 1,387 1,400 1,266 1,236 1,183 1,185 1,195 1,183 1,182 1,180 1,175 1,144 1,127 1,164 1,176 1,180 1,183 H1 H2 H1 H2
Slide 24: Service Acceleration as Fixed-line Replacement
Service Acceleration as Fixed-line Replacement PCCW y is the standard fixed-line device for new line service ¾Successful in transforming local voice telephony to a multimedia service and a key element in quadplay ¾Improving customer stickiness and facilitating ARPU uplift y Many loyal customers are
Slide 25: Market Leader in Broadband
Market Leader in Broadband • Broadband customer base continued to grow despite intense competition • Netvigator customers are loyal to good quality services. Churn at around 1% while acquisition momentum sustained. (‘000) 1,302 1,305 1,297 1,298 Wholesale 1,237 1,275 Business 1,176 Consumer 1,117 11
Slide 26: Fixed and Wireless Broadband Strategy
Fixed and Wireless Broadband Strategy Grow ARPU 1000M t h Increased Speed 100M r ow e G VDSL 2 nu 100M eve 50M R 30M ew N Differentiate NEW ! ADSL2+ 18M Auto Network Selector Netvigator ADSL Everywhere up 1.5-8M to 42M Over 7,500 hotspots Ubiquitous wireless platform Increased Mobility 25
Slide 27: Continue Growing PCCW mobile Base
Continue Growing PCCW mobile Base - 3G subscriber base up 29% y-o-y - Total subscriber base reached 1.47m, up 4% y-o-y 3G base - Blended (2G + 3G) post-paid exit ARPU increased to HK$134 from HK$132 in H1’09 +29% y-o-y (‘000) 1,469 3G 1,408 1,422 2G Post-paid 1,313 1,176 2G Prepaid 1,071 529 606 957
Slide 28: Focus on Mobile EBITDA
Focus on Mobile EBITDA Mobile EBITDA grew by 17% Mobile EBITDA (US$ million) Our Strategy: Focus on quality and high-end + 17% customer acquisition & retention while trading-off low-end 3G & 19 2G base 17 Manage cost by focusing our resources on providing premium services to our valuable custome
Slide 29: Recognized Data Network Services Leadership Today
Recognized Data Network Services Leadership Today PCCW High Speed Networks Dedicated to Smartphone Needs • Strongest HSPA+Fiber mobile network • Unique PCCW Wi-Fi with over 7,500 hotspots • Highest international bandwidth provisioning supported by PCCW Global Best End-to-End Data Network Services Le
Slide 30: High Speed 42M HSPA+Fiber Mobile Network Ready
High Speed 42M HSPA+Fiber Mobile Network Ready Faster Data Speed Further Enhancing Mobile Internet Experience Leadership in Today high speed mobile 42M technology 2008 21M er F ib P A+ HS 29
Slide 31: Increasing Data Usage and Revenue
Increasing Data Usage and Revenue Growing 3G Data Revenue Accounting for 45% Service Revenue 3G Data Revenue • >80% of our new handset-plan subscribers are Smartphone users +156% • Leadership in wireless broadband service continues to fuel growth of mobile data usage and revenue • Strong growth for
Slide 32: Growing a Profitable Business
Growing a Profitable Business Steady Growth Momentum (‘000) Installed Base 174 169 171 171 169 153 Installed base ARPU (HK$/ month) 125 80 87 94 67 55 953 992 1,001 1,028 27 882 927 9 818 758 608 549 441 361 269 147 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 2003 2004 2005 2006 2007 2008 2009 2010 31
Slide 33: The Widest Selection of Football Line-Up
The Widest Selection of Football Line-Up Largest Number of Leagues with OVER 1000 world-class live football matches a year ! From Spain, Italy, England, France, Holland, Japan, USA, Scotland & more 32
Slide 34: Exclusive Football Club Proposition
Exclusive Football Club Proposition • Localized Club Channel Experience appeal to Mass Fan Base - Top clubs including Manchester United, Liverpool, Chelsea, Arsenal, Manchester City, Barcelona, Real Madrid & Bayern Munich.* Cantonese language club content. • Customer Offering - Full coverage of reco
Slide 35: Exclusive Strategic Alliance with Manchester United
Exclusive Strategic Alliance with Manchester United • Exclusive strategic alliance with Manchester United - World's most popular football club as its Official Broadcast Partner and Official Integrated Telecommunications Partner in Hong Kong. • Exclusive TV, Quad-play and New Media Service Offering -
Slide 36: Widest & Most Comprehensive Spectrum of Variety Sports
Widest & Most Comprehensive Spectrum of Variety Sports • Unrivalled line-up of General Sports – Tennis grand slams & tours, World Snooker Tour, World Athletics Championships, World Volleyball Championships, Badminton World Championship & tours and golf majors & tours etc. Key International Sports Co
Slide 37: Strongest General Entertainment Content Proposition
Strongest General Entertainment Content Proposition Over 180 channels, VOD, and Network PVR Services….. Strongest Movie Strongest TV Series Strongest Kids 36
Slide 38: New Music Proposition
New Music Proposition 1st and largest concert hub in HK with over 100 Concerts-on- e w demand including exclusive MOOV Live concerts and over 1000 N MVs per year ! 37
Slide 39: Expanded Content Value Proposition
Expanded Content Value Proposition Transformation & Growth Increased Penetration via Multiple Platforms ic. Tv, internet, Mobile & Fixed Line, etc. ONLY PCCW sa PCCW
Slide 40: Using Technology to Meet Customer Needs
Using Technology to Meet Customer Needs 39
Slide 41: Ultimate Broadband Experience
Ultimate Broadband Experience Consumers are looking for: • A choice of speed • Mobility, broadband anywhere you want it • Fast access to overseas sites • Ease of connection via different kinds of devices • Excellent customer service 40
Slide 42: Our Fixed Broadband Evolution
Our Fixed Broadband Evolution Cat 5 Cabling Fiber Fiber-To-The-Cabinet Fiber-To-The-Building Fiber-To-The-Home ADSL 8M Exchange - FTTH Underground Copper <i ” VDSL2 Up to 100M =” NN pat Pocw r
Slide 43: Fiber Access Evolution
Fiber Access Evolution International Internet faromniseion In-building Technology & Local Service ; Last Mile Media : Home Bandwidth Provider 2 a See ALL Internatignal OLT Fiber Fiber PON Local ; J : 6 1000M and Beyond : . ‘ ONU Exchi eanee (Fiber Router) WiFi International DSLAM Cats Gateway k= | F
Slide 44: Fixed Broadband Coverage
Fixed Broadband Coverage 1.5M or above Continue to grow - (98%) subject to actual customer demand FTTB (70%) Territory-wide Coverage! 43
Slide 45: Ubiquitous Broadband Achieved
Ubiquitous Broadband Achieved by Integrating Fixed and Mobile Broadband ° Mobility 3G 42M DC-HSPA+ Network ° > 7,500 Wi-Fi Hotspots = 1,000 of these are “100M Fiber Hotspots” Wi-Fi Hotspot neivigator’ everywhere sat Broadband Everywhere!
Slide 46: High Network Availability
High Network Availability * 93 exchanges covering urban and rural areas ° Shortest transmission path to reach customers ° Facilitates provisioning * Redundancy gives higher network reliability
Slide 47: Broadband Beyond Hong Kong
Broadband Beyond Hong Kong 60% traffic goes beyond Hong Kong Reliable international bandwidth is critical oxetwaggattor®- Strongest International Bandwidth Network International bandwidth network is powered by pocwolh - Highly robust and resilient global infrastructure Reaching more than 1 ,000 citi
Slide 48: Excellent Customer Services
Excellent Customer Services The Best of The Sing Tao Excellent HK Service Top Service Best Awards AV Awards Awards (5 Yrs) Awards (12 Yrs) Services Award 星鑽 服務品牌 Best of IT E-brand Awards Touch Brand Yahoo! Emotive Mingpao e-trend Awards Brand Awards Award 47 47
Slide 49: Netvigator Offers Ultimate Broadband Experience
Netvigator Offers Ultimate Broadband Experience Netvigator A choice of speed 1.5M-1000M via mix of technologies: ADSL, ADSL2+, VDSL, VDSL2 & PON 98% coverage Mobility, broadband Over 7,500 Wi-Fi Hotspots, up to 100M anywhere you want it 3G, HSPA, HSPA+, DC-HSPA+ Supported by Fiber-to-the-Cellsite Fa