<font color=green>PCCW to Pay First Dividend After Profit Climbs 15%
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Aug. 26 (Bloomberg) -- PCCW Ltd., Hong Kong's largest phone company, will pay its first dividend since founder Richard Li used his Internet venture to take over the city's former phone monopoly four years ago.
The company will pay a first-half dividend of 5.5 Hong Kong cents a share after reporting profit rose 15 percent to HK$805 million ($103 million) for the period. Excluding apartments sales, revenue slipped 7.5 percent to HK$8.6 billion.
PCCW, which accumulated HK$141.8 billion of losses in the last four years, sold assets and fired workers to help the company return to profit as fixed-line market share drops. Operating costs fell 6 percent from a year ago. PCCW, which is in talks to stake in its fixed-line business to China Network Communications Group Corp., may make the business look more attractive with the dividend payment.
``It's positive,'' said Kenny Tang, head of research at Tung Tai Securities Ltd. in Hong Kong who forecasts the shares will rise because of the dividend. ``That should attract the institutional players and funds to invest in the company again.''
Deputy Chairman Jack So declined to discuss PCCW's dividend policy going forward. ``We will take into account the market practice, particularly that of our peer companies,'' he said at a briefing.
Fixed Line
PCCW is still losing fixed-line phone customers in Hong Kong to rivals such as Hutchison Global Communications Ltd. and City Telecom (H.K.) Ltd., which offer lower prices and services such as voice over Internet protocol. PCCW's fixed-line market share in Hong Kong shrank to 70.4 percent from 77 percent a year ago. Revenue from telecommunications services fell 11 percent to HK$7.5 billion.
Falling fixed-line market share ``won't go away, especially if you look at CTI launching its VOIP, which is getting more aggressive,'' said Mona Chung, who helps manage $800 million at Daiwa Asset Management Ltd. in Hong Kong. She said she doesn't own PCCW's stock and won't buy it at current levels.
Shares of PCCW closed unchanged at HK$5.50 before the earnings were released. Chung said she would buy at HK$5. ``I don't think PCCW for the long term deserves the current valuation,'' she said.
``With CTI getting so aggressive, eventually PCCW's fixed- line participation will continue to drop.,'' she said. ``It may mean we don't need fixed line services any more.''
PCCW said its rate of customer defection is slowing, but declined to provide details. Earnings before interest, taxes, depreciation, and amortization were HK$3.18 billion, compared with HK$3.86 billion a year ago. Its EBITDA margin was 44 percent, compared with 51 percent a year ago.
Broadband
The company cut its net debt by 11 percent to HK$29.55 billion. Total revenue for the first half was little changed at HK$10.7 billion, with sales from Bel-Air apartments at Cyberport contributing about HK$2.1 billion, up 31 percent from a year ago.
PCCW's NOW broadband television, started last September, helped boost the number of broadband access lines by a fifth to 753,000. Consumer broadband climbed to 558,000 lines from 460,000 lines a year ago.
``NOW broadband is the reason why the share price is trading so strongly,'' Chung said. ``Sentiment in the short term is likely to be good. I think it will challenge the HK$6 mark. There are a lot of positives for the stock in the short term,'' such as the possibility of Netcom buying a stake in the fixed- line business.
PCCW said this week talks with Netcom are in an ``advanced'' stage.
``It's obvious that China Netcom presents a vast opportunity, particularly in the southern provinces'' where Netcom has licenses for fixed line and broadband, So said.
A Bloomberg News survey of four analysts had a median forecast of HK$800 million for PCCW's profit for the first half.
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