COMPANIES & FINANCE ASIA-PACIFIC: PCCW reports record loss of HKDollars 6.91bn
Financial Times, Mar 29, 2001
By JOE LEAHY
Pacific Century CyberWorks, the Hong Kong internet and telecommunications company, yesterday reported a record loss driven by falls in the value of its investments and interest charges.
The net loss of HKDollars 6.91bn (USDollars 885m) compared with a profit of HKDollars 347m last time, and was sharply higher than analysts' expectations.
The figures included about four months of contributions from Hongkong Telecom, which PCCW bought from Cable and Wireless of the UK last August.
Underlying the losses were shrinking revenues in the company's core telecoms arm. The results showed the difficulty facing the debt- burdened PCCW in fulfilling its ambitious plan of becoming the region's first main integrated internet and telecoms group.
A former internet company, PCCW paid for its USDollars 28bn takeover of Hongkong Telecom with cash and shares backed by about USDollars 12bn of bank loans.
However, its share price has plunged on souring telecoms and internet sentiment and worries about a share overhang. Yesterday it was at HKDollars 3.475, down nearly 83 per cent from a year ago.
PCCW said losses on investments last year reached about HKDollars 5.2bn, which analysts said represented a write-down of nearly one third of the total value of its investment portfolio.
Many analysts had been expecting a write-down of only about HKDollars 2.5bn.
Less surprising, but more worrying, was competitive pressure on HKT, the group's cash cow.
The unit suffered a 7 per cent fall in turnover last year to about HKDollars 20.2bn, according to unaudited figures from PCCW.
Overall, PCCW said that revenue, excluding its regional mobile and fibre optic cable joint ventures with Australia's Telstra Corp, was largely flat last year, with losses in telecoms offset by increases in revenue from internet and other services.
Richard Li, PCCW chairman, said the company's interest coverage was about 3.5 times, above the minimum specified in its loan agreements of two times. However, analysts said the coverage was low. One analyst said Asian telecoms typically had coverage in the mid-teens while European carriers had coverage in the mid- to high-single digits. Lex, Page 24 Copyright: The Financial Times Limited
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