Pccw Limited · HKEX:8
Pccw — H1 2004 Earnings Presentation
30 slides from Pccw's earnings presentation, Aug 26, 2004
Slide 1: 2004 Interim Results
2004 Interim Results For the six months ended June 30, 2004 Hong Kong, August 26, 2004 1
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 3
Slide 4: H1 2004 Financial Performance
H1 2004 Financial Performance (HK$ million) (US$ million) Revenue 10,726 1,375 Net Profit 805 103 4
Slide 5: Half Year Achievement Report
Half Year Achievement Report Stabilize & NGFL service has greatly reduced line loss revitalize Strong broadband & growth core business Improve financials Continued to pay down debt Type II interconnection being phased out Reform outdated regulation Favorable Court and Competition Board rulings Domin
Slide 6: Dividend
Dividend y Capital reduction approved by shareholders in May ’04 and sanctioned by High Court in August ’04 y A key technical obstacle to dividend payout has been removed y Intend to declare an interim dividend of HK$ 0.055 per ordinary share payable in November 2004 6
Slide 7: Outlook
Outlook Further line retention improvement Core Business Continued broadband & growth Maintain strict cost controls Financials Further strengthen financial flexibility Regulatory Completion of non-dominance review Environment Expansion beyond Increase presence in China Hong Kong Studying wider wirel
Slide 8: Financial & Business Review
Financial & Business Review Alex Arena Executive Director & Group Chief Financial Officer 8
Slide 9: Summary P&L
Summary P&L (US$ million) H1’03 H1’04 YoY Revenue 1,375 1,375 0% Operating Profit 302 256 (15)% Gains on Investments, net 52 33 Provisions for Impairment Losses and Restructuring Costs (7) (4) Finance Costs, net (131) (128) Share of Results of JVs and Associates (52) 1 Profit Before Taxation 164 158
Slide 10: Solid Revenue from Core Operations
Solid Revenue from Core Operations Revenue (US$ million) 1,375 1,516 1,375 Bel-Air Core 341 186 269 1189 1175 1106 H1'03 H2'03 H1'04 Bel-Air Sales Further Supported the Top-line 10
Slide 11: Continued Progress in Reducing Expenses
Continued Progress in Reducing Expenses (US$ million) Tax Net Finance Costs 86 63 Depreciation & 55 Amortization 140 131 Operating Costs 128 184 187 161 409 418 386 H1'03 H2'03 H1'04 11
Slide 12: Accounting for Reach
Accounting for Reach (US$ million) H1’03 H1’04 YoY Revenue 452 409 (10%) EBITDA 37 51 38% y Group’s interest in Reach written down to zero as at December 31, 2003 y No equity pick up of loss in H1’04 y Loans to Reach are long-term assets on balance sheet secured by assets of Reach * The amounts are
Slide 13: Cyberport Investment Starts to Pay Back
Cyberport Investment Starts to Pay Back Bel-Air Sales – Sold more than 1440 units through June ‘04 Achieved – US$1.7 b sales (average US$1.2 m per unit) – Our initial investment of US$ 568m plus profit Positive expected to return to Group by 2008 Cash Flow – Already received US$118 m on August 9, 20
Slide 14: Solid Credit Fundamentals
Solid Credit Fundamentals PCCW Consolidated Debt/ EBITDA(1) HKTC 7.8 6.5 5.7 5.6 5.1 4.7 4.9 (US$m) Net Debt 4.1 (3) 3.4 3.4 3.4 3.3 3.1 5,176 2.1 5,039 4,430 901 4,220 4,280 H1’01 H2’01 H1’02 H2’02 H1’03 H2’03 H1’04 H1’01 H2’01 H1’02 H2’02 H1’03 H2’03 H1’04 1319 639 592 3,735 3,788 1304 4275 1661 9
Slide 15: Debt Profile
Debt Profile (US$m) Convertible Bonds US$ Bond due 2011 Japanese Yen Bond US$ Bond due 2013 Total Mandatory Convertible Note 7.88% Guaranteed Note US$4,173 m Revolving Credit Facility As of June 30, 2004 $1,154 $1,000 $956 $54* $1,100 $450 $456 $250 $359 $500 2005 2006 2007 2008 2009 2010 2011 2012
Slide 16: Defend Innovate Grow
Delivering on Promises Operational Strategy Review Aggressively defended market share Defend y Innovative new products & services y Regulatory initiatives New products & services Innovate New Generation Fixed Line PCCW Convergence Grow PCCW Innovations Protecting Customer Base & 16 Driving Growth
Slide 17: NGFL Services
NGFL Services Sign-up momentum remains strong y Targeting 50% penetration of our NGFL lines addressable lines by YE2004 (‘000) Target 1,000 y Enhanced services have stimulated 849 usage & increased loyalty 751 655 • Enriched infotainment 451 • Rewards & games • Cordless model of SMS phone y More app
Slide 18: Stabilized Core Business
Stabilized Core Business Average monthly net NGFL – effective churn reduction tool NGFL lines retail line loss (‘000) (‘000) -61% H1’04 1,000 40 v s H1’03 800 30 600 20 400 10 200 0 0 Q1 Q2 Q3 Q4 Q1 Q2 2003 2004 Customer Loyalty Increased by NGFL 18
Slide 19: NGFL Services Enhancement
NGFL Services Enhancement Cordless SMS Phone y 120k customers have signed up for our cordless phone in less than 3 months y Customers signing 18-month term plans y Enhance customer experience & further stimulate SMS usage Retaining Customers & Increasing NGFL Popularity 19
Slide 20: Strategy is Working
Strategy is Working Broadband revenue* enhanced 1) Solidifies Netvigator position as the premium by broadband provider – Market share rising since launch Revenue from: – Churn rate halved to less than 1% New Netvigator Customers – ARPU protected Existing Netvigator Customers 2) - another reason to w
Slide 21: Achieving Critical Mass
Achieving Critical Mass Sign-ups expected to accelerate in H2’04 Sign-ups with (‘000) 316 New to 274 111 205 77 y Undoubtedly the most credible pay-TV 41 contender in the market y Continuing to add more quality content 58 y Targeting wider customer base including major hotels & pubs y Technical deve
Slide 22: Quality Channels – Expect More to Come
59 Quality Channels – Expect More to Come Exclusive ! Exclusive ! Launched August 17 Target launch date end Nov’04 22
Slide 23: Broadband Growth Driven by Consumer
Broadband Growth Driven by Consumer Netvigator has grown faster Broadband Customers than the market since launch (‘000) Wholesale August ’03 to June ‘04 Business -y % y-o Consumer Consumer 20 broadband subscribers Sign-ups 753 +18.5% +14.6% 703 629 559 68 Netvigator Total Market* 487 63 58 52 44 Fut
Slide 24: Outlook
Outlook Further line retention improvement Core Business Continued broadband & growth Maintain strict cost controls Financials Further strengthen financial flexibility Regulatory Completion of non-dominance review Environment Expansion beyond Increase presence in China Hong Kong Studying wider wirel
Slide 25: Q&A
Q&A 25
Slide 26: Appendix
Appendix 26
Slide 27: 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 $250
Slide 28: HKTC Debt Maturity Profile
(US$m) HKTC Debt Maturity Profile 1 Feb 2001 $2,300 HKTC Debt to EBITDA = (4,700 / 1,123) = 4.19X $1,500 $900 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2031 Dec 2001 $1,991 HKTC Debt to EBITDA = (4,141 / 1,203) = 3.44X $900 $1,000 $250 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2
Slide 29: Assets & Interest Transferred Between PCCW & PCPD
Assets & Interest Transferred Between PCCW & PCPD Assets Transferred to PCPD Interest in PCPD Held by PCCW Independent Valuation HK$m US$m HK$m US$m 1 Investment Assets 6,757 866 1 New Shares* 2,967 380 a PCP Beijing 3,926 503 1,648m shares @ HK$1.8 each b PCCW Tower (Hong Kong) 2,652 340 c Queen's
Slide 30: Metrics
Metrics TSS Revenue TSS Operating Drivers (US$ m) Local Telephony ('000) H1’03 H2’03 H1’04 6 months period ended H1’03 H2’03 H1’04 Exchange lines in service 2,933 2,779 2,662 Business lines 1,266 1,236 1,175 394 378 344 Residential lines 1,667 1,543 1,487 Local Telephony Services (Direct Exchange Li