PCCW's Net Profit Jumps 25% --- Popular
Broadband TV Rescues Fixed-Line Arm As Customers Buy Packages
The Asian Wall Street Journal
(c) 2005 Dow Jones & Company, Inc.
By Evan Ramstad
HONG KONG -- The growing popularity of a broadband-delivered television service ended a decade-long erosion of customers in PCCW Ltd.'s fixed-line phone business, the company said, as it announced a 25% jump in first-half net profit.
PCCW, Hong Kong's dominant phone carrier with a 67% market share, is still experiencing falling revenue in its core business. Its overall revenue rose, however, on strong sales of luxury residences by its property division.
The company said it earned HK$954 million, or US$122.7 million, in the six months ended June 30, up from HK$766 million a year earlier. Revenue rose to HK$11.7 billion from HK$10.8 billion.
PCCW in September 2003 became the first telecommunications system in the world to broadly deploy television service over the same lines it uses for high-speed Internet service. The system's a la carte pricing for TV channels made it an instant hit.
The company yesterday reported 441,000 customers for the TV service as of June 30, up from 269,000 a year earlier. Though the service isn't profitable on its own, sales of fixed-term contracts that combine phone, Internet and TV service have slowed the exodus from PCCW's core phone business.
PCCW lost 53,000 lines at its core phone service during the first six months, less than half its loss of 117,000 lines in the same period a year earlier. In April, June and July, it added several thousand commercial lines and in July it added residential lines for the first time since regulators ended the company's monopoly on fixed-line phone service in July 1995.
"The momentum is really with us now," said Jack So, PCCW's chief executive officer. "The ultimate goal is to keep our market share."
PCCW's TV service, which started with 23 channels and now has 85, is one of the first successful examples in the world of broadband-delivered TV, sometimes called Internet protocol TV, or IPTV. The company's deployment benefited from Hong Kong's density, which lowered infrastructure costs, and its ability to forge deals with content providers that permitted the a la carte pricing.
"They've been very clever in the way they've done it, the way they've built it up a nice bundle and marketed it well," said Vivek Couto, executive director at Media Partners Asia Ltd., a market research firm.
Separately, PCCW's purchase in late June of a controlling stake in Sunday Communications Ltd., a mobile-service provider in Hong Kong, will affect its performance in the second half, company executives said. Sunday reported a net loss of HK$7.9 million for the first six months, amid a 7% jump in subscribers.
PCCW declared a dividend of 6.5 Hong Kong cents for the six months, up from 5.5 cents a year earlier.