PCCW to Cut Spending on Net Services to US$190M in 2001 (Update2)
Jul 04, 2001 - 19:01:41 HKT
Quamnet News Service
Pacific Century CyberWorks (0008) said it will cut its actual investment in Internet services by 5 percent this year to US$190 million in EBITDA terms, from US$200 million previously.
It also said it will cap investment in the services beyond 2001 to a maximum of US$100 million in EBITDA terms for a 24-month period beginning January 2002. The new investment represents less than 10 percent of historical group annual EBITDA, it said.
"The Internet Services strategy supports our core business objective to maintain margins and grow group EBITDA," said Richard Li, its chairman. "Our Internet Services strategy is designed to provide a value-added service for broadband, which is a key source of growth for the company."
PCCW said the Internet Services strategy aims to help spur the demand for broadband services, which will be a key growth driver for the company in Hong Kong. Beyond Hong Kong, the company's strategy will be designed to use scale and traditional advertising revenues to amortize content costs, it said.
As part of the restructuring of the business, the company announced earlier today that it will cut its staff numbers in the unit by 340 to 500. It expects the reductions will help it save US$16 million in costs a year.
Li declined to comment whether there will be further staff cuts this year.
"In Hong Kong, PCCW already has a large customer base. The company's Internet Services strategy is designed to leverage that base by integrating broadband access with PC and TV services. The additional services and content are expected to drive broadband adoption rates and increase usage by subscribers. This strategy also creates further value for the company's core business by increasing utilization of the existing digital network," said PCCW.
PCCW currently has the highest number of broadband subscribers in Hong Kong and is targeting both broadband and iTV subscriptions to more than double from 230,000 at the end of last year to more than 500,000 in 2003. In terms of adoption of broadband, Hong Kong is one of the world's most advanced markets, with a penetration of 7.41 broadband connections per 100 inhabitants, versus 2.25 per 100 inhabitants in the U.S.
PCCW said in Hong Kong, it is taking a two-pronged approach to allow users to access its content through either PC or TV.
For PC users, PCCW said it will provide a new service, to be branded now.com.hk, that will use Intranet-based streaming technology to provide local content. The service will be exclusive to PCCW Internet access subscribers. Revenue streams to PCCW will be both from subscriptions and from pay-per-view.
A number of new content partners will be announced at the commercial launch of the service, which will be in about six months, PCCW said.
PCCW also said going forward its iTV service will be based on a new and revised business model, with lower unit costs for content and new revenue sharing partnerships. The content will be delivered over broadband using PCCW's proprietary set-top boxes and will provide a platform for future customer migration to new platforms and more value-added services.
Li said with the latest restructuring, the Internet services are expected to break even on the cash flow level by the end of 2003, and the company also has plans to separately list that business in 2003. |
