David Prince, Group CFO. Salomon Smith Barney Global Telecom Media Technology Conference

Transcription

1 David Prince, Group CFO Salomon Smith Barney Global Telecom Media Technology Conference Hong Kong - 19 June, 2001

2 1 FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements that involve risks and uncertainties. These forwardlooking statements are not historical facts, but rather are based on the current beliefs, assumptions, expectations, estimates and projections of the management of Pacific Century CyberWorks Limited (the Company ) about the industry and markets in which the Company operates. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the control of the Company, are difficult to predict and could cause actual results to differ materially from those expressed or forecast in the forward-looking statements. Factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, (a) the Company's financing needs and its expected future expenditures for capital projects; (b) the pace of development of Internet and telecoms markets in Asia, the growth in demand for services in those markets, and the Company's ability successfully to develop, and sustain demand for, services that respond to those demands in the face of strong competition; (c) the Company's ability to generate revenues and profits from its Internet operations; (d) changes in the market price and valuation of the Company s investments in publicly-traded and non-publicly traded securities and its investments in joint ventures and associated companies; (e) the continuing effects of deregulation of the Hong Kong telecoms markets and PCCW's ability to deal with those effects; and (f) changes in the political, social, economic and regulatory environment in the countries in which the Company operates or intends to operate. An expanded statement of these factors can be found in the "Risk Factors" section of the convertible bond Offering Circular dated December 5, 2000 issued by PCCW Capital Limited, a copy of which has been filed by the Company with the United States Securities and Exchange Commission. Reliance should not be placed on these forward-looking statements, which reflect the view of the Company s management as of the date of this presentation only. The Company undertakes no obligation to publicly revise these forwardlooking statements to reflect events or circumstances that arise after publication.

3 2 PCCW TODAY FUNDAMENTALLY A DIFFERENT COMPANY A Leading Internet Company in Asia CyberWorks Ventures Pacific Convergence CyberPort Incumbent Carrier in Hong Kong International telecommunications Local telecommunications Mobile Internet and interactive multimedia services Technical and other services Merged August 2000

4 KEY FINANCIAL MESSAGES Tariff Rebalancing Almost Completed - Local line tariff increased in 2000 and Jan Impact of IDD Revenue decline is decreasing: 13% of Telecom Services Revenue Dec 00 down from 17% Dec 99 Secured Long-Term Financing In Advance Of Troubled Markets - Current interest coverage on HKTC syndicated loan: >3.5x interest Solid Net Cash Position - Over US$1 billion Cash One Off Charges/Provisions - Investment portfolio - Bridge loan financing We are confident about the Market Outlook For Broadband and data growth - Minimizing cash burn of internet businesses - Strong macro outlook for Greater China 3

5 4 A MORE TRANSPARENT COMPANY Pre-Merger (LOB not separately reported) Post-Merger (Individual P&L s) PCCW -4 lines of business HKT -5 lines of business PCCW -8 individual P&L s (including JV s) -Key revenue drivers for each BU Management Incentives tied to BU Profitability Applying Regulation FD type Disclosure New website launch - 1st phase end of July Detailed BU P&L s s available

6 5 PCCW TODAY STRUCTURALLY A DIFFERENT COMPANY Engine Growth Joint Ventures Infrastructure Telecommunication Services Business esolutions Data Centers B2C REACH: IP Backbone Regional Wireless 50% 40% Sales Channel Accountability Each BU Has Its Own P&L

7 6 PCCW GROUP DEBT STRUCTURE Guaranteed by PCCW 100% 50% USD750M CONVERTIBLE NOTE DUE 2006 USD1.1BN CONVERTIBLE BONDS DUE 2005 HKTC Reach 50% USD4.7 BN UNSECURED CREDIT FACILITY 3,5,7 YEARS USD1.5 BN UNSECURED CREDIT FACILITY 3,5,7 YEARS Non-recourse to PCCW Non-recourse to PCCW

8 7 SOURCES AND USES OF FUNDS 2001 Opening Cash 1 > US$1 billion TSS 2 Joint Ventures Reach & RWC B2C CyberPort Store of Value -non core assets FCF approx. US$ 450m Self Funding Investing Investing Property US$ 500 m Ventures US$ 309 m (self funding) 14.7% of M1 1. Net of short term debt 2. FCF pre Telstra transactions and February syndicated loan

9 8 PCCW CORE STRENGTHS Industry leader with strong customer base Ubiquitous and modern network with extensive coverage Strong expansion opportunities for core telecom business Multiple avenues of growth, broadband Internet, connectivity and value added services Highly qualified and reputable management team Strong strategic alliances and brand name recognition Transparent regulatory environment

10 9 TSS -STABLE CASH FLOW- IDD IDD revenue reliance minimizing - 13% in Dec 00 from 17%in Dec 99 Non dominant status gives pricing flexibility Retail Int l Private Leased Circuit (IPLC) Managed price decline - locked in contracts 63% increase in bandwidth to 1.4Gbps Moving rapidly into Managed Services Local Exchange Lines Tariff increase - Jan 2001 Total number of direct exchange lines maintained million Local Data Wholesale broadband net adds of per month in % market share Legacy data - bandwidth grew 27% to 86 Gbps - non reliance on dotcoms - 32% of revenues from banking/finance

11 10 BUSINESS esolutions -Externalizing Revenue- EBITDA breakeven in Dec Gross Revenue up 25% to US$154M Revenue mix changing from internal to external (51%) Key external System Integration contracts: Hong Kong Stock Exchange Airport Authority of Hong Kong Over Half of of 2001 targeted revenue under contract

12 11 INTERNET DATA CENTER -Key component of Total Solutions - Established Presence - Hong Kong - China (Beijing, Shanghai) - Singapore (Telstra JV) Demand driven expansion - lease based Established a total customer base of over Cornerstone clients requiring mission critical solutions Launched exclusive portfolio of managed solutions Key component of of Total Solutions

13 12 INFRASTRUCTURE & OTHERS -Store of Value- CyberPort (Hong Kong) PCCW Tower (Hong Kong) Pacific Century Place (Beijing) Property portfolio - Value in excess of US$500m CyberPort MobileOne % indirect interest PCCW Japan - 74% stake CyberWorks Ventures - Carrying value of US$309 M % of ilink

14 KEY MESSAGES FOR 2001 Stable and comfortable financial position Continue to meet strong demand for data and applications Continue to invest prudently Key areas of management focus - Growth - People - Costs 13

15 Merger Integration Jeff Bowden, Executive Director Strategic Integration

16 15 MERGER INTEGRATION THE COMPANIES ARE COMING TOGETHER Teams have gained deep knowledge of each other No two companies do things same way Using better/best practices to set objectives Focused on getting quick results It s not a 6 month process Focus on Customers, not Circuits

17 16 MERGER INTEGRATION ORGANIZATIONAL BOUNDARIES BEING REMOVED Products/regulations drove structure Refocusing on customer needs Integrated sales channels Solutions, not only bandwidth Regionalize The Company

18 17 TOP-LINE GROWTH Better understand customer needs/behavior - Narrowband to broadband migration Customers want bundles not piece parts - Vertical Services - Hardware/communications Services Win-back is a growth Initiative - Adding value to commodities - IDD Competing for Share of of Customer Wallet

19 Q & A Salomon Smith Barney Global Telecom Media Technology Conference Hong Kong - 19 June, 2001