Pccw Limited · HKEX:8

Pccw — FY2009 Earnings Presentation

44 slides from Pccw's earnings presentation, Mar 9, 2010

1. Slide 1: 2009 Annual Results

   2009 Annual Results For the year ended December 31, 2009 March 9, 2010 - Hong Kong 0

2. 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

3. Slide 3: 概覽

   概覽 艾維朗 集團董事總經理 2

4. Slide 4: 2009年宏觀問題 – 經濟

   2009年宏觀問題 – 經濟 金融海嘯發生後，經濟顯著疲弱 y 客戶深受打擊，商業活動放緩，部分公司倒閉 y 此外，失業率增加，影響社會的消費能力 3

5. Slide 5: 2009年宏觀問題 – 監管

   2009年宏觀問題 – 監管 在市場偏軟之際，監管當局採取不利公司的決 定，令情況雪上加霜 y 特別是取消固網／流動通訊的互連收費(FMIC)， 使按全年度基礎計算會減少收益約五千万美元 y 為此，本公司調低成本基礎，以彌補FMIC的損失 y 有賴全體員工悉力以赴、捨己為公，成本基礎的 調整工作已大致完成 4

6. Slide 6: 2009年宏觀問題 – 競爭

   2009年宏觀問題 – 競爭 電訊業的降價壓力仍未減退 y 電訊盈科選擇有利的時間、地點及方式與同業競爭 y 我們運用以下優點競爭： ¾ 透過「四網合一」策略，提供無可比擬的服務 ¾ 創意 ¾ 卓越客戶服務 ¾ 整體服務質量優於同儕 y 我們調低成本基礎，令各項業務的價格具競爭力，同 時採取策略以物超所值的價格提供優質服務 5

7. Slide 7: 2009年業績足以顯示

   2009年業績足以顯示 y 電訊盈科安然度過金融海嘯 y 我們已經調低成本基礎，抵銷監管當局採取不利決定 的影響 y 我們各項業務均以高效率與同業競爭；以及 y 我們的市場地位穩固 6

8. Slide 8: 2009年是電訊盈科轉型的一年

   2009年是電訊盈科轉型的一年 y 我們以更精簡、效率更高的姿態踏入2010年 y 我們不斷投資開發嶄新科技、網絡及服務 y 我們再次強調以客為尊的服務 y 相信經濟復蘇時，我們已部署好令整體業務增長 7

9. Slide 9: 顯著的增長動力

   顯著的增長動力 我們的傳統業務持續取得令人滿意業績，下列業 務更有長足進展： y 固網高速寬頻的需求 y 客戶對流動數據寬頻服務的需求 y 內容服務 － 因此我們有意申請本地的免費電視牌照 8

10. Slide 10: Overview

    Overview Alex Arena Group Managing Director 9

11. Slide 11: 2009 Macro Issues - Economy

    2009 Macro Issues - Economy Clearly a very poor economy following the financial tsunami y This impacted our customers negatively and we saw a reduction in business activity and some business closures y Also we saw higher unemployment impacting affordability in the community 10

12. Slide 12: 2009 Macro Issues - Regulatory

    2009 Macro Issues - Regulatory The soft market conditions were compounded by adverse regulatory decisions y In particular, removal of the fixed/mobile interconnection charge (FMIC) would cost about US$50m on a full-year basis y In response, the Company has adjusted its cost base to negate the loss o

13. Slide 13: 2009 Macro Issues - Competition

    2009 Macro Issues - Competition Pricing pressure continues unabated in the telecommunications sector y PCCW chooses when and where to compete and how it wishes to compete y We compete on the basis of our: ¾ Unrivalled range of services under our quadplay strategy ¾ Innovation ¾ Excellent customer se

14. Slide 14: As 2009 Financial Results Show

    As 2009 Financial Results Show y PCCW has weathered the financial tsunami relatively well y We have adjusted our cost base to counter the impacts of adverse regulatory decisions y We are competing effectively in all our lines of business; and y Our market position has consolidated and is secure 13

15. Slide 15: 2009 a Transformational Year for PCCW

    2009 a Transformational Year for PCCW y We have now entered 2010 on a leaner yet stronger basis y We continue to invest in new technology, our networks and our services y We have re-emphasized and strengthened our customer- focused services y We believe that as the economic conditions improve, we ar

16. Slide 16: Notable Growth Momentum

    Notable Growth Momentum While our traditional lines of business continue to perform satisfactorily, we are seeing particular growth in: y Fixed high-speed broadband demand y Customer appetite for mobile broadband data services y Content services – hence we intend to apply for a Free TV (FTV) service

17. Slide 17: 2009 FY Financial Performance

    2009 FY Financial Performance (US$ million) 2008 2009 Profit Attributable to Equity Holders 163 193 + 18% Revenue 4,096 3,215 Core Business* 2,821 2,674 EBITDA 1,023 961 Core Business* 860 861 * Core business includes telecom, media and ICT businesses The Board has recommended a final dividend of 13

18. Slide 18: Dividend Yields

    Dividend Yields Total Dividend Yield Interim Dividend yield Special 6.00% dividend: 3.91% 4.40% $1.30 per 3.66% 3.52% share distributed in May 2009 1.14% 1.26% 1.31% 1.36% 1.46% 2004 2005 2006 2007 2008 2009 DPS (HK$) Interim $0.055 $0.065 $0.065 $0.065 $0.070 $ - Final $0.096 $0.120 $0.120 $0.135 $

19. Slide 19: Dividend Payout Ratios

    Dividend Payout Ratios 100% 90% 74% Special dividend: $1.30 per 60% 52% share distributed in May 2009 Interim payout ratio: 72% 2004 2005 2006 2007 2008 2009 DPS (HK$) Interim $0.055 $0.065 $0.065 $0.065 $0.070 $ - Final $0.096 $0.120 $0.120 $0.135 $ - $0.133 Special $ - $ - $ - $ - $1.300 $ - Total

20. Slide 20: Financial Review

    Financial Review Susanna Hui Group Chief Financial Officer 19

21. Slide 21: Core and PCPD Results

    Core and PCPD Results (US$ million) Core Business* PCPD Revenue EBITDA 2,821 860 861 2,638 2,674 834 Core 31.6% 30.5% 32.2% EBITDA Margin 1,275 541 163 402 101 100 2007 2008 2009 2007 2008 2009 y Core revenue surpassed 2007 pre-crisis levels despite economic downturn, market competition and FMIC imp

22. Slide 22: Core and PCPD Results

    Core and PCPD Results (US$ million) Core Business* PCPD Profit Attributable to Equity Holders Core Business y -o-y % +1 8 193 y Core profit soared 24% on the back of solid business performance 193 163 134 156 126 PCPD y Gain on disposal of PRC 59 investment property 37 37 y Profit maintained 2007 20

23. Slide 23: Core Segments Performance

    Core Segments Performance (US$ million) Core Revenue TSS Breakdown Local 585 - 13% 2,821 Telephony 607 511 2,638 2,674 Local Data & 597 628 634 + 1% Broadband International 428 489 472 - 4% TSS Others 501 537 472 -12% Mobile 2007 2008 2009 TV & Content TSS 2,133 2,239 2,089 - 7% y Overall TSS revenu

24. Slide 24: Core Segments Performance

    Core Segments Performance (US$ million) Core Revenue Mobile 224 214 188 - 4% TV & 2,821 Content 218 287 301 + 5% 2,638 2,674 PCCW Solutions 230 239 236 - 1% Other TSS Businesses 32 11 8 2007 2008 2009 Mobile y Mobile TV & Content A 9% increase in mobile service 2,133 2,239 2,089 PCCW Solutions reven

25. Slide 25: Cost Efficiency

    Cost Efficiency (US$ million) Core Operating Expenses 12% S a vings Core Opex to Revenue Ratio 714 722 TSS 636 27% 26% 24% Mobile 475 495 TV & Content 408 2007 2008 2009 PCCW Solutions y Dynamic adjustments to the Other Businesses 92 89 103 cost base to counter market and Eliminations 69 68 regulato

26. Slide 26: Core EBITDA

    Core EBITDA (US$ million) Core EBITDA TSS 953 956 944 40 (FMIC) 904 v TSS 2007 2008 2009 Mobile y Steady performance after normalizing FMIC impact TV & Content 956 904 PCCW Solutions 953 Mobile Other Businesses 34 31 Eliminations 0 2007 2008 2009 (118) (105) (141) y Shrugged off intense competition

27. Slide 27: Core EBITDA

    Core EBITDA (US$ million) Core EBITDA TV & Content 1 834 860 861 (11) (20) TSS 2007 2008 2009 Mobile y Significant profitability milestone achieved in 2009 TV & Content 956 904 PCCW Solutions 953 PCCW Solutions Other Businesses 25 27 Eliminations 19 2007 2008 2009 (118) (105) (141) y Continued upwar

28. Slide 28: Group Performance

    Group Performance (US$ million) 2008 2009 Revenue 4,096 3,215 Core Business 2,821 2,674 Cost of sales (2,288) (1,571) Gross margin 44% 51% Operating expenses (785) (683) EBITDA 1,023 961 Core Business 860 861 EBITDA margin 25% 30% Depreciation and amortization (476) (485) Operating profit 547 476 Ot

29. Slide 29: Liquidity & Capital Resources

    Liquidity & Capital Resources Net Operating Cash Flow Debt Profile (US$ million) (US$ million) As of December 31, 2009 Group Net Cashflow from Operating Activities Long-term Revolving Credit & Term Loan Facilities Core Business Operating Cash Flow minus Capex US$ Bonds 1,018 Gross debt: US$4,521m 82

30. Slide 30: Credit Fundamentals

    Credit Fundamentals Net Debt (3) Net Debt/EBITDA (1) 3.8 3.6 (US$ million) 3.2 3.0 3.3 2.9 3,921 3,482 2,973 2,819 2,925 2,791 H1 H2 H1 H2 H1 H2 ’07 ’08 ’09 EBITDA/Interest (2) 5.0 5.4 5.1 4.2 4.4 4.6 H1 H2 H1 H2 H1 H2 2007 2008 2009 y Net Debt/EBITDA (1) as of Dec 31, 2009 was 3.6x y Net debt posit

31. Slide 31: Business Review

    Business Review Alex Arena Group Managing Director 30

32. Slide 32: Quadplay Update

    Quadplay Update Fixed line IPTV Broadband Mobile 31

33. Slide 33: Stable Fixed-line Business

    Stable Fixed-line Business Solid Customer Base Maintained Since 2004 (’000) Residential Lines Business Lines PCCW eye Multimedia Services y now the de facto fixed-line phone for new line service, and more customers are receptive 1,543 to upgrade 1,423 1,400 1,407 1,407 1,408 1,406 y High price premi

34. Slide 34: Market Leader in Broadband

    Market Leader in Broadband Consumer Broadband Continues to Grow Despite Fierce Competition (’000) Churn rate maintained at 1% Wholesale Business Consumer 1,302 1,305 1,297 1,237 1,275 1,176 1,117 113 113 114 998 107 110 953 104 99 857 94 88 80 1,136 1,146 1,099 1,126 1,060 1,005 952 840 798 715 H1 H

35. Slide 35: Unique and Successful Broadband Strategy

    Unique and Successful Broadband Strategy Grow 1000M ARPU h Increased Speed t 100M row e G VDSL 2 Introduced nu 100M in 2009 ve 50M Re 30M e w N Differentiate ADSL2+ Introduced 18M Auto Network Selector in 2009 ADSL 1.5-8M Over 6,000 hotspots Ubiquitous wireless platform Increased Mobility 34

36. Slide 36: Netvigator Redefines Broadband Service

    Netvigator Redefines Broadband Service Netvigator Broadband Also Includes: Wi-Fi, Wireless and Content Home fixed line broadband High speed outdoor broadband, up to 1,000M over 6,000 Wi-Fi hotspots in town + 19 free now TV channels & Ubiquitous mobile broadband 4 self-produced channels anytime anywh

37. Slide 37: PCCW mobile Performance

    PCCW mobile Performance Continue Growing PCCW mobile Base Revenue & ARPU - Total service revenue up 9% y-o-y 3G base - 3G exit ARPU HK$183 8% y -o-y +28% y-o-y + - Blended (2G + 3G) post-paid exit ARPU HK$138 3G 1,408 1,422 2G Post-paid 1,313 2G Prepaid 1,176 1,071 470 529 (’000) 957 414 921 288 206

38. Slide 38: Unique Offerings for Smartphones

    Unique Offerings for Smartphones PCCW Has Engineered Its High Speed Networks and Its Content Services to Meet the Needs of Smartphones Smart Service Smart Connectivity • Exclusive quadplay content and • Strongest network: HSPA + Fiber services • PCCW Wi-Fi with over 6,000 hotspots Smart Data Smart A

39. Slide 39: Developing the Smartphone Market

    Developing the Smartphone Market Engineering Ingenuity Open to All Smartphones • Introduced exclusive customized • Creative concierge service satisfying U-Android interface - helping grow customers with various smartphone penetration in different segments needs 38

40. Slide 40: Mobile Data Usage & Revenue Surging

    Mobile Data Usage & Revenue Surging 3G Data Revenue +57% Data Revenue Growth • Total data revenue increased by 34% y-o-y ¾ 3G data revenue which 2008 2009 represents 36% of 3G service revenue, surged by Mobile Data 57% y-o-y Revenue • Leadership in wireless +34% broadband continues to fuel growth of

41. Slide 41: Growth Despite Economic Challenges

    Growth Despite Economic Challenges Steady Growth Momentum (’000) Installed Base 174 169 171 171 153 Installed base ARPU (HK$/ month) 125 87 94 992 1,001 80 953 67 927 55 882 27 818 9 758 608 549 441 361 269 147 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2003 2004 2005 2006 2007 2008 2009 40

42. Slide 42: Leading Pay TV Operator in Hong Kong

    Leading Pay TV Operator in Hong Kong • Widest and most comprehensive spectrum of sports content with world-class football such as Spanish La Liga, Italia Serie A, Copa del Rey, all tennis grand slams and other popular international sports including World Snooker Tour, World Athletics Championships,

43. Slide 43: Capturing Growth Opportunities

    Capturing Growth Opportunities • Market Leader of general entertainment offering both breadth and depth in content line- up with the most and the newest 1st run home entertainment proposition on pay-TV: • Enhance Customer Viewing Experience Compelling HD content New content offerings HD 42

44. Slide 44: 2009 a Transformational Year for PCCW

    2009 a Transformational Year for PCCW y We have now entered 2010 on a leaner yet stronger basis y We continue to invest in new technology, our networks and our services y We have re-emphasized and strengthened our customer- focused services y We believe that as the economic conditions improve, we ar

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