PCCW to cut spending
By Joe Leahy in Hong Kong
Published: December 4 2000 18:40GMT | Last Updated: December 4 2000 19:26GMT
Pacific Century Cyberworks, the Hong Kong internet and telecommunications company, is to cut spending on its business-to-consumer broadband services, including its flagship Network of the World (NOW) interactive broadcaster, by one-fifth.
PCCW now plans to cap spending on the business-to-consumer segment at US$200m per year compared with US$500m over two years as previously planned, said Richard Li, the 33-year-old chairman and founder of PCCW.
He said synergies realised from PCCW's takeover of Cable & Wireless HKT, Hong Kong's dominant telephone operator, in August, and changes in industry valuations since the global internet bubble burst in April, meant the company should still be able to realise its ambition of building NOW into the leading service of its kind in Asia.
However, analysts said the move showed the extent of PCCW's evolution away from being a pure internet company a year ago towards becoming an internet and telecoms infrastructure services provider today.
NOW is an interactive broadband service, offerings from which span television content to online gaming.
It was a central part of the market's valuation of PCCW as an internet growth stock during the global technology bubble this year.
That valuation enabled PCCW, once a little-known internet company, to execute its US$28bn takeover of C&W HKT.
"Now they are changing the business model," said Jerry Pang, internet specialist of institutional sales at HSBC Securities in Hong Kong.
"They do realise NOW is going to be less significant than it was. It's not really a key component of the company."
Mr Li said the company had spent US$197m on its business-to-consumer operations since 1997.
Now, using its stock as currency, it should be able to acquire applications, software and skills from other service providers through mergers and acquisitions at much more attractive valuations than during the internet boom.
"Now we have a tremendous amount of infrastructure . . . and with merger and acquisition activities, I have a lot of faith that we can achieve that [NOW's goals]," Mr Li said.
In the latest acquisition, PCCW Japan on Monday said it had acquired a 51 per cent stake in a mobile and internet content production company, B-Factory Co, for US$2.8m.
The move will bolster PCCW's regional mobile service, PCCW Japan said.
HSBC's Mr Pang said that while NOW has been important for sentiment, the service has become a minor part of PCCW's operations following the merger.
The company's main businesses are the fixed-line network it inherited from HKT, and two joint ventures with Telstra Corp, Australia's dominant phone company.
These include an internet protocol backbone business and a regional mobile phone company.
"The convergence stuff is still pretty much a pipe dream at the moment," Mr Pang said.
However, in the future, PCCW might be able to build on its considerable infrastructure franchise to cross-sell such services to existing clients.
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