CyberWorks to Cut Costs, Boost Packaged Service Sales, Li Says
By Cathy Chan
Urumqi, China, May 28 (Bloomberg) -- Pacific Century CyberWorks Ltd., Hong Kong's dominant phone company, will cut costs and boost sales to offset a declining fixed-line business, company Chairman Richard Li said.
CyberWorks' traditional phone services sales are expected to be flat or shrink this year, analysts said. Phone services sales fell 7 percent last year as long-distance revenue slumped 34 percent because of increased competition and falling rates.
The company is under pressure from investors to produce plans to restore the eroding phone business and set a new strategy for the Internet business, one of the causes of the company's $886 million loss last year.
``We've plans ready,'' Li said in an interview. ``From the equipment side, we'll see whether it's the right technology. We'll also review the payroll of senior staff.''
The cost-cuts, which he wouldn't detail, will help the CyberWorks achieve a 5 to 8 percent increase in earnings before interest, taxes, depreciation, amortization this year, Li said. Last week, Li wouldn't guarantee jobs when he spoke to workers.
``In the short-term, sales have to be customer-oriented and margin is cost (control), but we would not cut all over the place to hurt the growth potential,'' he said.
CyberWorks hopes to boost sales by tying telecommunications with services such software consulting, system integration, data hosting and connectivity. The gross profit margin of packaged services is more than 40 percent, Li said.
These services now generate about 10 percent of sales, compared with ``almost zero'' when CyberWorks took over Cable & Wireless HKT Ltd. in August, Li said.
The company will seek to increase capacity for providing packaged services, Li said. ``That may have to come from mergers and acquisitions'' of information-technology service companies, Li said. He didn't give details.
The so-called business-to-business telecom services already earmarked 10 percent of its revenue from ``almost zero'' contribution when CyberWorks took over Cable & Wireless HKT Ltd. Last August, Li said.
CyberWorks may need to find a cheaper broadband transmission method than digital subscriber lines (DSL), a technology that allows for faster data transmission on an ordinary copper wire, rather than over fiber-optic link, Li said.
``The cost compared with the volume doesn't' come down enough to be worthwhile for telco operators like us to rely solely on it in the long-term,'' Li said. The company may need to upgrade the city's phone lines to improve Web service, he said.
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