2011 interim resul

8/2/2019 2011 Interim Resul

1/53

2011 Interim ResultsFor the period ended June 30, 2011

,

Hong Kong


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Forward-Looking Statements

This presentation may contain "forward-looking statements" that are not

historical in nature. These forward-looking statements, which include,',

operations, financial condition or business prospects, are based on the

current beliefs, assumptions, expectations, estimates, and projections of the

directors and management of PCCW about the business, the industry andthe markets in which PCCW operates. These statements are not

,

other factors, some of which are beyond PCCW's control and are difficult to

predict. Actual results could differ materially from those expressed, impliedor forecasted in these forward-looking statements for a variety of factors.

1


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Alex Arena

Group Managing Director

2


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2011 H1 Financial Performance

*

H110 H111 % changeH110 H111 % change

+ 3%Revenue + 2% 1,5131,376 1,5621,402

+ 1%EBITDA + 5% 4743 48445

106 + 8%9100 + 17%85Attributable toEquity Holders

The Board has declared an interim dividend of 5.3 HK cents per share

3

* Core business includes telecom, media and ICT businesses


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An Attractive Dividend Yield Play

Total Dividend Yield

Interim Dividend Yield

Special

dividend:6.00% 4.51%

HK$1.30

per share

distributed in

May 2009

3.66% 3.52% 3.91%.

1.46%1.14% 1.26% 1.36%1.31%

2004 2005 2006 2007 2008 2009 2010

.

H111

.

Interim $0.055 $0.065 $0.065 $0.065 $0.070

Final $0.096 $0.120 $0.120 $0.135 $ -

$ -

$0.133

$0.051

$0.102

$0.053 + 4%

pec a

Total $0.151 $0.185 $0.185 $0.200 $1.370 $0.133 $0.153

$ - $ - $ - $ - $1.300 $ - $ -

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Maintaining a Solid Payout Ratio

100%

74%Special

dividend:

HK$1.3060% 58% 47%

Interim

payout ratio:

per share

distributed in

May 2009

Interim

2004 2005 2006 2007 2008

72%

2009 2010 H111

Interim $0.055 $0.065 $0.065 $0.065 $0.070

Final $0.096 $0.120 $0.120 $0.135 $ -

$ -

$0.133

$0.051

$0.102

$0.053 + 4%

pec a

Total $0.151 $0.185 $0.185 $0.200 $1.370 $0.133

$ - $ - $ - $ - $1.300 $ - $ -

$0.153

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Susanna Hui

Group Chief Financial Officer

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Core Business Solid Revenue Growth with Strong EBITDA

(US$ million) PCPDCore Business*

432421

32%

1,342 1,376,

296 160

EBITDA

Margin

H109 H110 H111H109 H110 H111

39 31

Strong fundamentals of core segments led to higher

*

Core EBITDA growth momentum continued with

enhanced EBITDA margin PCPD revenue edged up due to higher propertyselling prices achieved

core revenue

7

ore us ness nc u es e ecom, me a an us nesses


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Delivering Greater Value for Shareholders

Profit Attributable to Equity Holders

(US$ million)

Core Business*

Earnings Per Share

11.33 HK cents106PCPD (H110: 11.30 HK cents)84

100

Core profit jumped 17%

Higher EBITDA contributions

73

segments

Lower finance costs

H1'09 H1'10 H1'11

11 6

8

* Core business includes telecom, media and ICT businesses


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Outstanding Track Record - Tangible Evidence of our

Leadershi Position and Successful uad la Strate

(US$ million)

Core Revenue Core EBITDA

TSS

2,7522,674

2,821

2,638

906861

860834

Mobile

TV & Content

,

898 953956 904 904

437Eliminations

PCCW Solutions

Other Businesses1,4021,376 453432

4628

Core

EBITDA

Margin

32% 32% 31% 32% 33% 31%32%

(40) (20) (11)

1 3019 25 27

(24)

(101)(118) (141)

(105) (105)

63013

(42) (56)

20102008 20092006 2007 H110 H111

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A High-margin Stronghold plus Fast Growing Businesses

EBITDA Margin

80%

100%

TV & Content

Mobile80%

100%TSS

40%

60%

PCCW Solutions

40%

TSS high margin business

providing strong and steady40%

60%

20%

10%

24%19% Both Mobile and TV & Content

businesses continuing their

20%

-20%

0%accelerating growth

-20%

0%

-40%

2006 2007 2008 2009 2010 H1'11

-40%

2006 2007 2008 2009 2010 H1'11

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TSS Transformation Strategy Supports Strong Cashflow

TSS RevenueTSS EBITDA

(US$ million)

1,1001,0671,057(US$ million)

230Others

439 436 437

Broadband Network 214200

Local Data+ 3%

122 123 127

International + 18%232 237 281

H111H110H109

Local Telephony -14%273 246 212

Solid revenue growth driven by structural transformation from voice to dataH109 H111H110

New generations of eye X set to fuel further uplift of stabilized fixed-line ARPU

Firm broadband revenue - retention/ acquisition strategy in progress for- - Continued rebalancing upheld solidEBITDA and cash flow Healthy growth for local data in the improved business environment

, ,

Robust performance in international telecom business due to highbandwidth demand and Reach integration

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Mobile Business Enters Accelerated Growth Period

(US$ million)

Mobile Revenue Mobile EBITDA

Services revenue rose 11% on increased data usage by a

larger 3G customer base with higher ARPU

3G data revenue u 77% as smart hones and tablets

EBITDA increased on higher 3G data usage

populate the market

Post-paid exit ARPU uplifted y-o-y to HK$160 from HK$134

Migrating post-paid 2G customers to 3G network improved

integrated network and lower incremental

operating costs

12

efficiency and ARPU


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Telecom Business Growing on Multiple Drivers

+ + o e

+43%Mobile

455

465

455

Mobile +10%

1,2181,1741,163

Growthdrivers+ 8%International

Others

TSS

steam

Local Telephony

Local Data +Broadband

H109 H111H110H111H110H109

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Solid Strategy Execution Delivering Results & Profitability

(US$ million)

TV & Content Revenue

140 151152

FY 2010

EBITDA

US$30m

' ' '

Financial performance reflects successful execution of sstrategies to grow ARPU and expand customer base

Revenue stable and growing despite non-renewal of BPL Strategic decision to not pursue BPL at

H110 H111H109

ARPU boosted by more exclusive sports programming and otherpremium content, leveraging our multi-screen strategy

Continued to develop unique IPTV interactive capabilities such asinteractive game shows

,significantly enhancing profitability

Strength in self-produced local programming offers new growth potential

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Standing to Gain from Rising Services Demand

(US$ million)

PCCW Solutions Revenue

139 142

116

1'09 1'10 1'11

A leading full service IT provider with strong capabilities in offering

complete end-to-end data center, infrastructure, hardware,

software, business process, and cloud computing services Steady revenue growth with contracts gained across various

sectors in Hong Kong and mainland China, and from expanding

data center hosting services

in step with revenue

15

upporte y ro ust pro ect p pe ne


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Optimal Cost Management for Business Growth

Core Operating Expenses(US$ million)

26% 23% 24%312

343 341

Core Opex to Revenue Ratio

H110H109 H111

Staff costs rose in line with business

growth

Higher publicity and promotion

Increased rentals on shops and

H110H109 H111

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Financial Performance(US$ million)

H110 H111 H110 H111Group Core

evenue , ,

Cost of sales (703) (705)

Operating expenses (333) (373)

, ,

(632) (608)

(312) (341)

++

Net other gains and restructuring costs 4 13

Net finance costs (94)(102)

4 11

(85)(92)2 1

Profit before income tax 136 151Income tax (27) (38)

21%25%

103 130(15) (28)

20% 15%Effective tax rate

Profit for the period 109 113

Non-controlling interests (11) (7)

+ 8%

88 102

(3) (2)

85 100 + 17%

EBITDA 477 484 432 453 + 5%

Earnings per share (in HK cents) 11.30 11.33

+ 1%

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Disciplined and Predictable Growth-Oriented Capex Regime

(US$ million)

Capex focuses on business

streams with higher ARPU

and better return (e.g. mobile

411 Core Business Capex

and high speed broadband

networks)228

208

Capex is demand-driven and

variable, as infrastructure is

already in place

Capex to revenue ratio well

within guidanceCore Business

201020092008 H111

Capex to

Revenue Ratio: 8% 8%15% 8%(In addition, the Group received US$81m

fixed assets from Reach integration)

18


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Strong & Steady Operating Cash Flow

*

(US$ million)

653 678

449 340

2008 2009 2010 H1'11

With strong half-year performance, full-year target is on track

*

19


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Ample Liquidity with Significant Interest Savings In Sight

June 30, 2011Core Business Net Debt (1) (2)

(US$ million)

Long-term Revolving Credit & Term Loan Facilities

US$ Bonds

Gross debt: US$4,529mNet debt: US$3,481m

(US$ million)

US$75m

undrawn facility US$1,278m

undrawn facility

500

1,000

500

952

430641

500

2010 2011 2012 2013 2014 2015 2016

Ample liquidity with US$1.35 billion undrawn to meet

foreseeable obligations and fund future growth

2008 2009 2010 2011

Effective interest rate 3.8% (excluding finance fee)~2.5% expected post re-financing of the 2011 bond

Average debt maturity 2.8 years

(1) Net debt refers to the principal amount of short-termand long-term borrowings, minus cash and cashequivalents and certain restricted cash

(2) Net debt for the Group excludes PCPD

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Well-managed Debt Level

HKTGH(3) Net Debt(1)/EBITDA(2)PCCW Group Net Debt(1)/EBITDA(2)

2009 2010 20112009 2010 2011

(1) Net debt refers to the principal amount of short-term and long-term borrowings, minus cash and cash equivalents and certain restricted cash

(2) Based on net debt as at period end divided by EBITDA for the 12-month period

' '

21

eno es roup o ngs m e -


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Alex Arena

Group Managing Director

22


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Quadplay Update

11% y-o-y customersgrowth

Stable customer base

services launched widely

uHub consumer cloudlaunched

Introducing Android-based eye X

Mobile Media

- -while EBITDA +43% y-o-y

3G data revenue grew to 62%

of service revenue

Customer base and ARPU

grew despite BPL departure

EBITDA achieved US$30m

New: RoamSave & CustomerService Apps

in H111

23


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Stable Fixed-line Business

Solid customer base maintained since 2004

(000)

Residential LinesBusiness Lines

1,543

,1,400 , , , 1,406 , ,

1,2361,144 1,164 1,180 1,183 1,195 1,182 1,183 1,217

2003 2004 2005 2006 2007 2008 2009 2010 H1'11

24


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Evolving from Voice to Multimedia Communications

eye X : Android-based series addressing different segments

Now

Voice + Data

eye XMonochrome

Color screen

Voice Onlyeye 2

eye Wi-Fi enabled

Additional feature:

Android platform Similar user experience asAndroid's mobile handsets Access to Googles Android market

Video Call

now TV Streaming Secured Transactions

NGFL

Quad Play Apps

now TV Decoder

for ~250k Apps, including Facebook Access to Googles services:YouTube, Google Maps, GoogleSearch, Gmail

Voice + Data + Video Call +Content Apps & Transactions

Octopus Card Reader MMSDEL Fixed-line SMS

Interactive Info

25 Executing to a Comprehensive Strategy

-


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Market Leader in Broadband

Broadband customers grow 11% despite intensive price competition with churn retained to less than 1%

Our uni ue ro ositionin of fixed and wireless broadband continues to be a stron differentiator

Wholesale

(000)

1,437

107110 113

113 114 114115

116BusinessConsumer

953998

1,1171,176

1,237 1,2751,302 1,305 1,297 1,298

,

1,0991,126 1,136 1,146 1,148

1,2151,285

80

88 94

99857

715798

840, ,

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1

26


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Rapid Growth of High Speed Broadband

FTTB Read 80% * 1.5M or above

(supporting speeds up to

100Mbps)

(98%)

FTTH Ready (52.5%)**

(supporting speeds up to

*FTTB Ready means FTTH service can be available within 29 days of receiving a service order, building management access permitting. In-Building VDSL-2 upto 100 Mbps is also normally available in FTTB ready buildings and can be available within 4 days of receiving a service order.

Our Strategy: Leadership in high speed broadband via multiple technologies

Figures at end of July 2011** FTTH Ready means FTTH service can be available within 4 days of receiving a service order

, x , w re ess an vers e spee s

27


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Exponential Growth of High Speed Broadband Customers

The mass launch of FTTH service attracting new customers and existing customers for service upgrade

72,000 NETVIGATOR customers enjoying FTTH service at the end of July 2011

80,00030,000

72,000 cumulativeFTTH customers

Mass LaunchTesting Phase

srs (> 1G capable service)

60,000

No. of monthly new FTTH customers

No. of cumulative FTTH customers

customer

H

custom

40,000

20,000

tiveFT

TH

newF

TT

20,000

10,000

o

fcumul

ofmonthl

00

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Dec-10

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

No.

No.

28


30/53

Unique and Successful Broadband Strategy

GrowGrow

ARPUARPU1000M

peed

200M to 500M

VDSL 2VDSL 2

ased

100M50M30M

Incr

Auto Network Selector

ADSL

18M

ADSL2+

NETVIGATOR

Everywhere

Over 9000 hotspots Ubiquitous wireless platform

1.5-8M up to 42M

29


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Introducing Consumer Cloud Services Adding Value

ConvenienceConvenience A private storage server enables all your photos, music library, videos and documents toA private storage server enables all your photos, music library, videos and documents tobe stored and retrieved anytimebe stored and retrieved anytime

CompatibilityCompatibility

Eas to UseEas to Use

Supports differentSupports different smartphonessmartphones and tabletsand tablets

Multiple devices can be kept in sync for uninterrupted accessMultiple devices can be kept in sync for uninterrupted access

Video formats ad usted to our smart hone and tablet automaticall for eas viewinVideo formats ad usted to our smart hone and tablet automaticall for eas viewin

SecuritySecurityMaximum security is assured as all files go directly to a local server without the need toMaximum security is assured as all files go directly to a local server without the need torouting through the Internet overseasrouting through the Internet overseas

30


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International Telecom Business a Growth Portfolio

International Telecom Services Revenue

Wholesale Connectivity

IDD + LAC

as global bandwidth demand increasing and

wholesale voice traffic remains stable

PCCW Global has further strengthened its network

coverage and service availability with interconnection

agreements among overseas service providers and

+ 28%

carriers, opening up new service opportunities

Ability to globally interconnect MPLS VPN and

-11%

applications such as the first High-Definition Video

Conferencing

H1'09 H1'10 H1'11 Efficiencies gained from the Reach integration

have provided better operating margin to PCCW

31


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Expanding PCCW Globals MPLS VPN Coverage

MPLS VPN stands for Multiprotocol Label Switching Virtual Private Networks

or w e coverage across more an , c es an over coun r es serv ngenterprises and global carriers

Global interconnections assure enterprise customer connectivity and applications such as

32


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PCCW mobile Targets High-end Customers

- 3G subscriber base up 45% y-o-y

- Total subscriber base reached 1.5m, up 3% y-o-y3G base

3G2G Post-paid

- os -pa ex ncrease y-o-y o rom

- Newly acquired smart-phone subscribers recorded ARPU around HK$400+45%y-o-y

55 119206

288414

470 529 606 667 8802G Prepaid

(000)

583

456 491516 462 460

459 440430 376 319 250

43

282 290 350376 405 429 459

H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H12005 2006 2007 2008 2009 2010 2011

Focusing resources on quality and high-end users of smart devices to drive up profitability

33


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Wireless Data Usage and Revenue Update

Growing 3G data revenue accounting for 62% of 3G service revenue

3G Data Revenue

3G data revenue in H111 grew by+77% y-o-y

y-o-y

Over 90% of our new handset-plan

su scr ers are smartp one users

H108 H109 H110 H111

34


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Pioneer in Capturing Trendy Tablets Market

PCCW mobiles leadership in tablets market continues

leveraging unique strength of our fixed, wireless and mobile networks

Only PCCW provides

combinations of home and

out-of-home connection

services

At HomeAt Home

OutOut--ofof--HomeHome

PCCWs unique offerings of

a variety of service plans

differentiate from competitors

Choices of Plans

1. Mobile HSPA SIM

2. Pocket Wi-Fi

3. PCCW Wi-Fi

4. NETVIGATOR Home Wireless

Variety of Tablets

PCCW leveraging from wide

relationships with both PC

and handset vendors

Ubiquitous connection

35


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Meeting the Challenges of Mobile Data Growth

Smart devices are bandwidth hun r

Industrial standard moving from 7.2M to 21M

Ever-increasing challenges for mobile operators

21M

HSPA+

Ready

PCCW has anticipated the market development and leveraged on our unique

mo e +, xe , an - ne wor s o prov e e es ne wor so u ons

to meet mobile data demand, and an unparalleled customer experience

42M DC-HSPA+ mobile network Over 90001000M+ fiber backhaul- o spo s nc u ng

exclusive MTR coverage

36


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Providing Affordable Roaming Propositions

Data Roaming

o :More affordable

pay-as-you-go data

oam aveAt just HK$8/day :

First-in-market

Incoming callIncoming call

roaming charge plansvoice roaming app utilizing

Wi-Fi fixed networks

Day Pass

At just HK$98 /day :Unlimited data roamingat top travel hotspots

37


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Janice Lee

Managing Director, TV & New Media

38

O i f PCCW M di


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Overview of PCCW Media

Largest pay television service in Hong Kong* with over 1 Millionsubscribers

A si nificant roducer of o ular Chinese lan ua e ro rammin(including news, financial news, sports, entertainment programming, musicconcerts and events)

Content and video-streamin services

HKs largest digital music subscription service

Web-based Yellow Pages yp.com.hk

& Directories

Business

3939

y revenue

T k R d i G i


41/53

Track Record in Growing

-

Customer and ARPU Growth

and achieving subscriber growth

Solid subscriber management , superior customer service, and overall strong contentrewar e w cus omer oya y

153169 171 171 174 169 165 167

Installed Base Installed base ARPU (HK$/ month)

(000)

818882 927

953 992 1,0011,0281,0391,088

927

55 67 8087 94

269

361441

549608

147

H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H12003 2004 2005 2006 2007 2008 2009 2010 2011

40

S lid E i D li i R l & P fi bili


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Solid Execution Delivering Results & Profitability

Revenue

2011 Interim Results

(US$ million)

218

287306301

H1

execution of s strategies

Cost Savings Realized Strategic decision to

not ursue BPL at uneconomic rices2007 2008 2009 2010 2011 1H

151 (H1)

significantly enhances profitability

H1 2011 revenue stable and growing

des ite non-renewal of BPL.30 30

EBITDA(US$ million) H1

Strategic investment in unique interactive

production and content enhancements

1

(11)

6 (H1)

(20)2007 2008 2009 2010 2011 1H

41

A hi i S t i bl G th i H K


43/53

Achieving Sustainable Growth in Hong Kong

1. GrowARPUthroughPremiumContentandInnovative

Services

2. MultiScreenStrate toex andaddressablemarket

.

UniquelyDifferentiatesnowTVandincreasesARPU

42

Achie ing S stainable Gro th in Hong Kong


44/53


1. Grow ARPU through Premium Content and Innovative Services

MegaSportsPackenhancedwithnewworld

classpropertiesincludingTennisGrandSlams

and

ATP,

NBA,

PGA

Tour,

MUTV

&

ESPN

HD

(TopUppriceatHK$50 $135permth)

Ru b WorldCu 2011 HK$388event ass

HongKongsfirstPayHongKongsfirstPayPerPerViewVODserviceViewVODserviceofferingcurrentandtopHollywoodstudiosmoviesfrom20thCenturyFox,Paramount

SetantaRugbyChannel(HK$128) UEFAEURO2012

(abilitytoincreaseMSPprice)

c ures, arner rosan n versa

AvailablesamedayasDVDreleaseinHK,viewingonbothIPTVandonPC (payperviewatHK$25$30permovie)

New Contents include Pay TV and Online rights

SDandHDformats,with5.1Dolbysurroundsound

43



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2. Multi-Screen Strategy Provides convenient multi le-device viewin to ca ture viewers di ital consum tion

Expand addressable market beyond households to individual subscriptions

As we renew and acquire new content, we will enrich our multiple screen offering with

Web

sports.now.com news.now.com movie.now.com

Mobile

Tablet

Smart TV

Connected

44



46/53


3. Original Real-Time Interactive Production Uniquely Differentiates NowTV and increases ARPU

(Coming in Sept 2011)Adding to the family of 19 now branded locally

produced channels . . .

Exclusive stories, scripted and reality programs

Innovative interactive features allowing

favorite entertainment news!Enabling Customer Participation in Large

Numbers with Remote Control

-

45

Business Outlook


47/53

Business Outlook

Delivering on our promise . . .

2010 - US 30M EBITDA Full Year

2011 - Delivered US$30M EBITDA in 1H,and On Track to Deliver on Full Year Plan

46


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o ut ons

eorge oanag ng rector, o ut ons

47

Industry-Recognized Market Leader


49/53

Industry-Recognized Market Leader

HK Professional IT ServicesMarket Share (2010)

China and HK Professional ITServices Market Share (2010)

Selected Awards and Recognition

#17 in Leader Category (2011)

Global Outsourcing 100

#1 of China IT Outsourcingservice enterprise (ChinaSoftware and Services

Best IT Outsourcing Award

,

2005 2011

Breakthrough

Implementation Awards

APICTA Awards (Asia) forHKSAR ePass ort S stem

(US) for HKSAR HKID card

4848

, ., , , , ,

Huge and Rapidly Growing Market


50/53

Huge and Rapidly Growing Market

China + HK Professional IT Service Market

on

24%CAGRtoreachUS$2.6Bby2015(IDC)

Chinaoffshore

IT

services

pose

as

alternative

toIndia,toreachUS$4.3Bin2015,CAGR

19.7%(IDC)

th

smartcities,eGovernment andcloud

computinginitiatives

orrester orecastsmu t c anne mo ean

tablet)experiencewilldrivedigitalcommerce;

analytictoolsforpredictivemodeling;and

socialnetwork

to

broaden

channels

and

ProcessManagement

Development&Integration

ITManagement

Consulting

customerreach

49

Source:Gartner,Inc.,MarketShare:ITServices,2010,KathrynHaleetal,March31,2011

Long-Term Relationships with Blue-Chip Clients


51/53

Long Term Relationships with Blue Chip Clients

700+clientsacrossdiverserangeofindustries

Repeatbusinesseswithlongtermcontractsofanaverage8+years

Public Sector

Retail &Manufacturing

Media &

Communications

Financial Services

Transportation

50

Solid Business Growth


52/53

Solid Business Growth

Revenue

(US$ million)

239 236270

Steadyrevenuegrowthwithcontractsfor

projectdevelopment

and

long

term

recurring

servicesfromvarioussectorsofbluechip

customers

StronggrowthinEBITDAgivenproductivity

EBITDA

2008 2009 2010

(US$ million)

gainandleverageofChinaresourcepoolof4

OffshoreDevelopment

Centers

in

Beijing,

Shanghai,Guangzhou,andXian

3127

25 Solidcashflowcontributionasthebusiness

requiresminimalcapexinvestment

2008 2009 2010

5151

2011 H1 Core Performance


53/53

2011 H1 Core Performance

(US$ million)Core Business*

Revenue + 2%

c ange

1,376 1,402

EBITDA + 5%432 453

Net Profit100 + 17%85

*

52

,

2011 interim resul

Documents