PCCW restructures, revamps ’Net strategy
Frances Chan, 16-Jul-2001
Pacific Century CyberWorks (PCCW) has announced lay-offs and a revamp of its consumer Internet strategy on the same day in a bid to trim costs and boost investor confidence.
Citing “too much overlapping manpower” after the last year’s merger between PCCW and Cable & Wireless HKT, PCCW chairman Richard Li announced that he will axe 290 staff, mostly from the Internet service Netvigator editorial side. Fifty others will be transferred to other departments.
Although Li declined to comment on whether there will be more redundancies, Cheng Chun-man, chairman of the PCCW Employees’ General Union, said: “We are afraid of further layoffs, and we expect there will be some more coming.”
Geoff Johnson, research director, Enterprise Network Strategies, Asia-Pacific, Gartner, said the retrenchment is an understandable move to sustain growth and maintain marketshare with the whole market under cost-cutting pressure. He added that further staff cuts depend on how fast PCCW can cover existing debts.
In spite of the cutbacks, the company plans to cap investments in Internet services at a maximum of US$100 million in EBITDA [earnings before interest, taxation, depreciation and amortisation] terms for 24 months starting from January 2002. The Internet services spending for this year has been downsized to US$190 million, in contrast to the US$200 million announced previously.
Li said Internet services will break even on a cash flow basis by December 2003, with a separate listing in store by the end of 2003.
“The Internet services strategy supports our core business objective to maintain margins and group EBITDA,” said Li in a statement.
“Our Internet services strategy is designed to provide a value-added service for broadband, which is key for the company’s growth.”
But the revamp involving the relaunch of now.com.hk service at the end of July and the shutting down of the Netvigator portal—while keeping only its e-mail and Internet access services—represents a scale-back of Li’s original vision for Network of the World (NOW)—a broadband content service delivered over a converged TV and Web offering.
According to Li, the remains of Netvigator will be combined with now.com.hk and interactive TV (iTV) business to form the new Internet services division. Li said revenue of now.com.hk will come from both subscriptions and pay-per-view.
Gartner’s Johnson noted that PCCW’s new strategy is “reasonably possible” but whether it can be successful or not depends on how fast the payback of investment can occur.
“The success of NOW will also rely on how well the pay-per-view services like video-on-demand services will be accepted. Hong Kong is still testing interactive TV’s role,” said Johnson.
Promising to provide “highly differentiated and local content”, PCCW might aggregate content from a number of new providers such as Television Broadcasts, Commercial Radio and Next Media with its iTV and the 1.5 Mbps Ultraline broadband services subscribers.
The company also expects its subscribers for broadband Internet services and iTV to grow to over 500,000 in 2003 from 230,000 at the end of last year. |
