HK PCCW: CapEx Up At Least 10% less '01 Vs US$528M In '00
Updated: Wednesday, March 28, 2001 08:58 AM ET
(Corrected 05:16 AM)
HONG KONG (Dow Jones)--Pacific Century Cyberworks Ltd. said Wednesday it recorded a net loss of US$886 million in the 12 months ended Dec. 31 compared with a small net profit of US$44 million in 1999.
That was based on revenue of US$935 million, up from US$19 million in 1999.
It reported a provision of US$627 million on its investment portfolio in the 12-month period, and another US$40 million on other provisions.
David Prince, group chief financial officer, said the provisions were taken in the current year in order to preserve cash flow going forward.
The earnings for 2000 include four-and-a-half months of contributions from the assets bought from Cable & Wireless HKT, a deal with the U.K's Cable & Wireless PLC (CWP, news, msgs) in February 2000. Purchase of the company was completed Aug. 17.
Cyberworks said goodwill incurred in 2000 from the takeover of HKT of US$22 billion, which was written down against reserves and in line with company practice in previous years, was calculated based on a purchase price of US$28.9 billion for HKT. That includes US$11.3 billion settled in cash and US$17.6 billion paid by the issuance of new shares.
Prince said although the write-down of goodwill will result in a negative equity, this was "always envisaged."
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The results came significantly below analysts' expectations, which had centered on a loss of US$291 million
The Internet and telecom company said it paid US$284 million last year in interest costs on the US$12 billion dollar bridge loan taken out to finance the purchase of Cable & Wireless HKT. This loan has since been refinanced by a US$4.7 billion syndicated loan. The Internet and telecom company expects the same interest payment on that loan in 2001.
The bulk of revenues for the former Hong Kong monopoly telecom operator continued to come from telecommunication services. However, income from this division fell 7% to US$2.59 billion from US$2.78 billion in 1999. The share of total revenues made up from international direct dial operations fell to 13% from 17%.
The connectivity operations, which have since been injected into a 50-50 joint venture with Australia's Telstra Corp. (TLS, news, msgs), reported revenue of US$941 million and an operating margin of 53%. This business was completely included as income from associates in the 2000 earnings.
On the other hand, mobile phone operations, called CSL, were only 40% included in earnings in the four-and-a-half months since the takeover. Those assets are now part of a joint venture with Telstra, giving the Australian company a 60% stake.
CSL saw a 5% rise in revenues to US$663 million, and a 3% increase in average revenue per user to US$58.
At a joint press and analyst briefing, Chairman Richard Li said revenues from telecom services are expected to be largely flat in 2001.
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Li also projected that capital expenditures would fall by at least 10% this year from the capital spending of US$528 million in 2000. However, he said the company hasn't yet taken a deep look at those numbers.
The capital spending for 2001 doesn't include money to be spent on the connectivity and mobile units now under joint ventures with Telstra.
Overall, PCCW's cash position remained solid, with US$1.77 billion cash-on-hand at the end of December, Prince said. He also said the company had been able to secure its financing early this year before global markets started to deteriorate.
PCCW is also confident about the outlook for the market in 2001, Prince said, adding that the closeness to China will provide some "cushioning" against the slowdown in world markets.
Revenues are expected to see "high single-digit growth" this year as the company's non-telecom operations, such as Business eSolutions and business-to-consumer operations, will continue to grow strongly, said Deputy Chairman Francis Yuen.
The Business eSolutions operations saw a 25% rise in revenues to US$154 million in 2000, while the business-to-consumer division reported 34% growth to US$143 million.
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For the period under review, PCCW paid $302 million on finance charges related to the debt it raised for the $28.9 billion purchase of Hong Kong Telecom.
It is expected to pay $284 million in interest expense in 2001, which is the same as last year.
PCCW expects its Cyberport project, a Silicon Valley-dubbed property development, to generate revenue by last quarter of 2002.
Going forward, the company pledges to stick to principles including cost-cutting and establishing new sales channels.
We plan "to direct them (staff) to the ability to grow business," said Executive Vice President Jeffrey Bowden.
Shares of PCCW closed the day off 0.7% to HK$3.475, losing 87.5% of its value from a record high of HK$27.859 in Feb. 15 last year.
-By Dow Jones Newswires; 852-2802-7002; djnews.hongkong@dowjones.com
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