A mixed FY09 for PCCW

Sherrie Huang/Ovum
12 Mar 2010

On 9 March 2010, Hong Kong incumbent PCCW released its FY09 results. The year has been decidedly mixed for PCCW; adverse economic and regulatory conditions, the loss of exclusive content deals, and a failed privatization bid have not stopped it returning an 18% increase in its consolidated profits.

PCCW is the wireline market leader, the second-ranking pay-TV service provider and the fourth largest mobile operator in Hong Kong.

2009 was not kind to the company. Economic conditions in Hong Kong were as bad as elsewhere, with pressures on consumer spending. The telecoms market in Hong Kong is very saturated, with penetration rates for household fixed line, household broadband, and mobile of 101%, 79%, and 171% respectively at the end of 2009.

The three BWA licenses released in January 2009 have further increased competition in the market. The deregulation of fixed-mobile interconnection charges (FMIC) in April 2009 will also cost the company approximately $50 million annually, according to PCCW. In addition, its failed attempt to delist has damaged its image and led to financial pressures and legal troubles.

Revenues from PCCW’s core business, which includes telecoms, media, and ICT, dropped 5% to HK$20.9 billion ($2.7 billion) due to decreases in its fixed and mobile revenues and losses resulting from the deregulation of FMIC. TV and content grew 5%, but its ebitda turned positive for the year. Its consolidated profits achieved an 18% increase, reaching HK$1.5 billion ($194 million), mainly due to stringent cost control – for example, 12% savings in its core operating expenses and a 50% decrease in its group capex in FY09. The re-evaluation of its property revenues had a positive effect on its total revenues. However, its debt was around HK$35.3 billion ($4.5 billion).

PCCW maintained its fixed-line and broadband access subscriber bases, and ARPU was stable, through a mix of its quad-play bundles and the increasing demand for broadband. Its ‘eye’ and ‘eye2’ multimedia services, launched in 2007 and 2009 respectively, also contributed to the gains, with its installed TV base increasing 5% year-on-year despite the loss of its exclusive deal for English Premier League football.

Its mobile subscriber base grew 8%, above the market average of 5%; this was due to a 28% increase in its 3G postpaid subscriber base. However, its blended ARPU declined 9.8% due to price pressures.

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