Agenda I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

AgendaAgenda

I. PCCW OverviewI. PCCW Overview

II. TransitionII. Transition

III. PCCW-HKT AnalysisIII. PCCW-HKT Analysis

IV. ConclusionIV. Conclusion

PCCW OverviewPCCW Overview

PCCWPCCW CyberportCyberport

Cyberworks VenturesCyberworks Ventures

Pacific ConvergencePacific ConvergenceCorporationCorporation






Pacific Convergence CorporationPacific Convergence Corporation

• Broadband access provider

• Broadband content provider via NOW (Network of the World)






CyberportCyberport

• Real estate venture contracted by the HK government

• Information, Multimedia, and Telecommunications hub






Cyberworks VenturesCyberworks Ventures

• Internet venture capital firm / incubator

• Over 100 companies in their portfolio worth approximately US$1 billion






Core Business (Pre-HKT Merger)Core Business (Pre-HKT Merger)

• Strategy of core business: Build a diverse portfolio of Internet companies with strong technological capabilities, thus positioning PCCW as the gateway for Internet businesses entering Asia

• Focus on Cyberworks Ventures arm

• NOW channel is under development





TransitionTransition

Shift in FocusShift in Focus

InternetInvestments Broadband






Factors Leading to Shift in FocusFactors Leading to Shift in Focus

• Internet stock prices plummeting

• IPO market drying up

• Broadband use increasing

• Wave of content-access mergers

(AOL-Time Warner, Excite @Home)






The MergerThe Merger

• Feb. 2000 – PCCW makes bid on HKT

• Aug. 2000 – PCCW acquires HKT for US$38 billion






Strategy Behind PCCW-HKT MergerStrategy Behind PCCW-HKT Merger

• Shift in focus presents need for broadband infrastructure and expertise

• Pressure to generate a stable source of revenue because of NOW’s growing pains

• Strategic intentions or Impulse buy?





PCCW-HKT AnalysisPCCW-HKT Analysis

Core Business (Post-HKT Merger)Core Business (Post-HKT Merger)

• Strategy of core business: To become the world’s largest provider of broadband Internet content via NOW and high-speed Internet access

• Focus on Pacific Convergence Corporation arm

• Signs of progress– NOW channel launches in Hong Kong– Deal signed with Indian ISP, Data Access






Key Success FactorsKey Success Factors

• License or create compelling content for target market

• Build strong partnerships with:– Cable TV operators

– Telephony operators

• Complementary resources needed, such as distribution, marketing, and complementary technologies.






Competitive AdvantagesCompetitive Advantages

• Li family influence

• Largest telecommunications infrastructure in Hong Kong

• Broadband network that reaches 70% of Hong Kong households

• Human Resources– Expertise in broadband access

– Seasoned management team






ChallengesChallenges

• Direct competition

• NOW = No One Watching

– Weak content library

– Programs are currently in English only

• Broadband in Asia has yet to be widely adopted






More ChallengesMore Challenges

• Financial hardships– Dead money in Cyberworks Ventures

portfolio

– Debt from acquiring HKT

• Investors skepticism

• Faltering reputation

• Deregulation of telecommunications industry in Hong Kong






RecommendationsRecommendations

• Focus on content – Continue acquiring compelling content

– Develop the current eight “web channels”

– Regionalize content, making it difficult to imitate

• Continue seeking partnerships with connectivity operators in Asia






More RecommendationsMore Recommendations

• Sell off unnecessary assets to:– Refocus and strengthen core business

– Pay off debt

• Increase transparency of company’s business model

• Identify and exploit potential synergies between all aspects of PCCW





ConclusionConclusion

• Logical shift in PCCW’s business focus

• Current competitive advantages are outweighed by the number and severity of challenges

• Public had little faith at start of Richard Li’s Star TV, which is now a satellite broadcasting powerhouse.





Documents

Agenda I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion