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Investor Presentation

March 2015 - Hong Kong

This presentation may contain “forward-looking statements” that are not

historical in nature. These forward-looking statements, which include,

without limitation, statements regarding PCCW's future results of

operations, financial condition or business prospects, are based on the

current beliefs, assumptions, expectations, estimates, and projections of the

directors and management of PCCW about the business, the industry and

the markets in which PCCW operates. These statements are not

guarantees of future performance and are subject to risks, uncertainties and

other factors, some of which are beyond PCCW's control and are difficult to

predict. Actual results could differ materially from those expressed, implied

or forecasted in these forward-looking statements for a variety of factors.

Forward-Looking Statements

1

2

(US$ million)

Core Businesses

Solid EBITDA

& cash flow

HKT FY14 Revenue 3,695

FY14 EBITDA 1,313

Market Value (as at March 9, 2015) 9,785

Growth

businesses

Media FY14 Revenue 414

FY14 EBITDA 58

Solutions

FY14 Revenue 432

FY14 EBITDA 80

PCPD FY14 Revenue 40

FY14 EBITDA (21)

(100%) (100%)

(63.07%)

Figures in brackets represent ownership by PCCW as at March 9, 2015.

(70.80%)

Solid Telecom Business Media & Solutions Businesses – Growth Focus

FY14 Revenue 4,266

FY14 EBITDA 1,326

Market Value (as at March 9, 2015) 4,587

Trends in Motion – A Digital Global World

It will be an increasingly mobile-centric world

Consumers are looking to

• Consume content – anytime and anywhere

• Quality of experience

Telecom to move away from ‘basic communications pipe’

Enterprises will increasingly engage with their customers digitally

Businesses will have to deal with massive quantities of complex data

Market uncertainty, new business models, technology disruptions and

cyber security will impact all businesses

3

● Expand content creation and

co-production

● Establish global distribution

platform

● Differentiate with Industry- specific

solutions

● Targeted acquisitions to expand

business globally

● Value-added services

● IP/assets for global markets

● Extend OTT service with focus

on Entertainment and Music

● Global partnerships

● Roll out Digital Platform and

Services

● Enhance Digital Transformational

capabilities

● World-class communications

and networks

● Customer experience

“Globalize our IT Services, provide Digital Platforms to Enterprises,

Expand the reach of our Media Content and Distribution on OTT, and

Enhance our Local and Global Connectivity to deliver Digital Lifestyle

and Experience.”

Aspiration – A Global Leader in Digital Lifestyle World

4

5

Media – Strategic Direction

Build on Hong Kong Leadership Position

Expand Content Creation and Co-production

Expand Global Partnerships

Build and Extend OTT Platform with focus on

Entertainment and Music

Leading Asian Digital Media and Entertainment

Service Provider

6

Solutions – Strategic Direction

Integrate software and services to build Digital Platforms and Solutions

Develop and acquire industry-specific and innovative technologies to deliver solutions for

global customers

Extend Industry Expertise in

Mainland China

“We will Enable our Customers to Transform their Businesses

into Digital Enterprises.”

Expand into New Markets

Build Up Intellectual Property & Software Assets

Integrate Software & Services

Broaden Technology & Sales

Partnerships

New Geo focus - US and

Western Europe

7

Smart Workforce

• Strengthen recognition

and performance based

pay culture and practices

• Build global reward

structure taking into

account local market

practices

• Increase visibility for high

performing employees

Building a Global

Brand

Employer of Choice

Developing Leaders

and Nurturing Talent

Recognizing and

Rewarding Performance

Connecting with

Employees

• Build awareness of

PCCW as a global

company

• Establish ties with top

colleges and universities

to attract strong talent by

participating in research

initiatives, seminars,

development programs

• Enhance development

programs for top leaders

• Build cross functional

expertise, establish

tailored development

and exposure for growth

• Participative work

culture that welcomes

and respects employee

ideas and suggestions

• Deploy multiple

communication

channels

8

Media Business

9

(US$ million) Media Revenue

• Revenue continue to rise by 7% underpinned

by consecutive years of solid subscription and

advertising revenue growth in our Core Media

business

• Growth in new media revenue (e.g. MOOV)

323 347 372

37 40

42

2012 2013 2014

360 387

414

+ 7% + 7%

Core Media

Business

New Initiatives

61 63 61

2 2

(3) 2012 2013 2014

• Core Media business EBITDA and margin reflected full-year impact of BPL costs

• Investments for new initiatives including upgraded MOOV platform, expansion of now

player and preparation for free TV business

Media EBITDA

63 65 58

Steady Pay TV Performance

Investing in Digital Growth

Core Media

Business

EBITDA Margin 19% 18% 17%

818

882 927

953 992 1001

1028 1039 1088

1140 1165 1183 1204

1237 1269 1285

125

153

169 171 171 174

169 165 167 169

172 173 174

187 191

195

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2

Installed Base Installed base ARPU (HK$/ month)

10

Continued Market Leadership in Pay TV

2007 2008 2009 2010 2011 2012 2013 2014

Thousands

now TV continued to grow customer base whilst increasing ARPU through consistent

up-selling of its wide range of content and services

Content and Brand Leadership (1)

• Independent study shows overall rating of 68.80, a significant 5.13 points increase

• Downloads of now TV apps topped both Apple and Android stores #

• Total now TV app downloads have now reached 4 million

Total Channel Apr-14 Jul-14 Oct-14 Compared with

previous rating

1 now TV 64.84 63.67 68.80 +5.13

2 Cable TV 67.69 66.97 67.37 +0.40

3 TVB 68.36 65.07 63.23 -1.84

4 ATV 58.78 58.95 59.08 +0.13

2014 TV Programme Appreciation Index Survey (3rd Stage),

conducted by Public Opinion Programme, HKU

11

now TV has established itself as a leading local HK news provider

4M app download

Users enjoy now TV contents via now apps in

HK

# HK - overall free app - No. 1 : iOS: 4-6 Oct / Android: 9-11 Oct

HK - news free app - No. 1 : iOS: 4-8 Oct, 15-18 Oct / Android: 30 Sep - 4 Nov

News Leadership:

Content and Brand Leadership (2)

New Productions in the Pipeline

舉世無雙

• Co-production of a new TV drama series with Ciwen Media (慈文傳媒)

• A 40-episode ancient Chinese drama series on the romance of the Emperor Taizong

of Tang (唐太宗李世民) and the Empress Zhangsun (長孫皇后). Production will start

in 2Q 2015 at Hengdian World Studios (橫店影視城)

• We will continue to scale up our production pipeline which will allow us to

differentiate now TV’s service offering

Successful First TV Drama Series Production

衛子夫 (The Virtuous Queen of Han)

• Co-production with Huace Film & TV

• Reached more than 38 million TV viewers in China* with total online accumulated hits of over 2.38 billion

since first broadcast

• Distributed widely in Overseas Markets incl. Taiwan, Malaysia, Singapore, Vietnam, Thailand, Cambodia,

the Philippines, Sri Lanka, Japan, South Korea, Australia, New Zealand and North America

12

* Gross viewership based on ratings from the first week of telecast. Source: 28 Aug 14 China Prime Time Satellite TV Series Ratings from CSM

Increasing Entertainment Production:

Continued Expansion of International Footprint

13

Established important affiliate partnerships to distribute now TV channels across Asia

and North America

Latest addition to footprint

now Baogu movie channel launched in Taiwan on Taiwan Broadband

Communications Cable TV service, reaching 800K subs

Territory Affiliates

Malaysia Telekom Malaysia HyppTV

Singapore StarHub Limited

Thailand CTH Public Co. Ltd.

Indonesia Big TV (First Media)

USA Dish Network Corp

Canada

Fairchild TV

Telus Optik TV

Rogers Communications

Bell Fibe TV

Vietnam Viettel

Taiwan Taiwan Broadband Communications (TBC) new now Baogu movies on TBC

While maintaining its edge as HK’s

leading and award-winning music service, Moov

continues to expand into China:

Continued Expansion of MOOV Footprint

14

• Following a successful launch in Guangdong,

MOOV is expanding its footprint to Fujian,

Shanghai and Xinjiang via exclusive

cooperation with BesTV

• MOOV continues to strengthen its breadth and

depth of content for mainland China market

including International repertoire, Kpop, and

popular local Chinese music label.

Marketing Excellence Award 2014

Mob –Ex 2015

Best App: Social (Gold)

Best App: Creative Design (Gold)

IT Solutions Business

15

199 225 225

119

155 207

2012 2013 2014

16

(US$ million) Solutions Revenue

• Solid recurring revenue base

• Strong growth in project based revenue

driven by successful execution of projects

• Overall data center occupancy rate

remained high at 85%

Recurring

Project

Based

• EBITDA grew by 20% to US$80M

• Margin maintained at 18%

EBITDA

Margin

40 43 47

16 24

33

2012 2013 2014

Solutions EBITDA

56

67

80

18% 18% 18%

Stable Base Recurring Revenue

Continued Growth Momentum

2010 2011 2012 2013 2014

Revenue + 14% + 8% + 12% + 20% + 14%

EBITDA + 42% + 35% + 14% + 20% + 20%

318

380

432

Notable Contract Wins in H2 2014

IT Services Market Leader

17

• Replace and upgrade the Hong Kong Vessel Traffic Services System

for Marine Department

• Long-term infrastructure services for an healthcare organization

• Core banking solution for Chengdu Rural Commercial Bank

Secured order of US$730 million as of December 31, 2014

• Market leadership in Hong Kong

• Continue to win significant and long-term contracts

from public sector and large enterprises

Revenue by Industry and Services

18

Telecom 27%

Public Sector (HK) 34%

Hi-Tech and Media 18%

Travel & Hospitality

7%

BFSI 6%

Retail & Manufacturing

5%

Others 3%

FY2014 Revenue by Industry

Enterprise Applications

22%

Cloud Solutions &

Infrastructure 25%

Application Development

& Maintenance

23%

Technical Services

23%

Business Process

Outsourcing 7%

FY2014 Revenue by Services

Strong penetration into the telecom and banking industries in China:

● Strong footprint in top telecom operators

● Expanded core banking to Auto finance and Peer-to-peer finance

Successfully replicate our expertise to diversified industries, including:

● Retail

● Manufacturing

● Media & Entertainment

● Healthcare

Continued Investment in China

19

Data Center Expansion

● Officially unveiled 202,000 sq.ft., 16-storey Powerb@se

MCX10 Data Center in Kwai Chung

Uptime Institute Tier III Certificate

LEED Platinum Certificate

● Expand the platform to deliver a full spectrum of IT

services

● Drive innovative applications development and adoption

via Enterprise Solutions Superstore Alliance (ESSA)

platform and ESSA incubation program

● Provide cross-border data center service to facilitate

MNCs to enter China, and Chinese companies to expand

into overseas markets

20

MCX 10

Hong Kong

Guangzhou

Data center

Rich Solutions Portfolio

21

Cloud Solutions

● Full spectrum of cloud services – ranging from infrastructure, platform, software,

content to process

● The only SAP certified provider of cloud and hosting services in Hong Kong and

China

● Helped SOLERS upgrade existing SAP Business One system to SAP Business

All-in-One cloud solution

Industry-specific Software Assets

● Launched the international version of iVisionBanking suites:

VisionBanking Suite – the core banking solution tailored for banks

VisionFinance Suite for finance institutions

● Tianjin Great Wall Binyin Automotive Finance and Chengdu Rural Commercial Bank

have deployed iVisionBanking

Telecom Business

22

HKT EBITDA

1,313

1,013 983

2012 2013 2014

HKT Revenue

3,695

(US$ million)

2,927 2,703

Mobile

Eliminations

TSS Others

Others

International

Local Telephony

Local Data

23

Solid Performance

Mobile and Broadband Leading Growth

• Adjusted Funds Flow up 16% yoy to US$430 million

• PCCW to receive a total distribution of approx. US$271 million from HKT for FY14

Mobile

Others

TSS

2012 2013 2014

HKT

EBITDA

Margin US$ million

2013

Pro-forma *

2014 YoY

Growth

Mobile Revenue 1,072 1,147 + 7%

Mobile EBITDA 376 403 + 7%

* Pro-forma to include the proportionate share of CSL FY13 results

36% 35% 36%

(25) (27) (34)

927 912

944

673 860 898

Broadband

Network

+ 6% 776 828 862

436 440 447

395 340 346

(56)

88

(77) 72 88

(61)

International

+ 4%

391 432

1,147

96 113

403

24 24

Adjusted Funds Flow

Adjusted Funds Flow for the year 343 372 430 + 16%

Adjusted Funds Flow before tax paid, net finance costs

paid and changes in working capital 519 554 632

Capital expenditures (244) (254) (322)

(US$ million) 2012 2013 2014 YoY

Adjusted Funds Flow per Share Stapled Unit (HK cents) * 41.64 45.21 44.30

+ 30%

Adjusted for:

Tax payment (26) (42) (51)

Net finance costs paid (93) (88) (102)

Changes in working capital (57) (52) (49)

+ 14%

Interim Distribution (HK cents) 20.06 21.00 21.00

Final Distribution (HK cents) 21.58 24.21 23.30

Total Distribution for the year (HK cents) 41.64 45.21 44.30

Adjusted Funds Flow per Share Stapled Unit (HK cents) based on the weighted average number of Share Stapled Units during the year

39.99 43.43 47.32

Less cash outflows in respect of:

Customer acquisition costs and licence fees (220) (205) (359)

EBITDA 983 1,013 1,313

+ 9%

* Calculated by dividing the adjusted funds flow for the period

by the number of Share Stapled Units in issue at period end

Mobile Business Underpinned by Rapid Progress

on CSL Integration

25

● Total customer base of 4.585M

– Post-paid customer base of 3.178M

* Figures stated as at December 31, 2014 or for the year ended December 31, 2014

● Post-paid exit ARPU of HK$219

● Mobile data represents 68% of total services revenue

● IDD and roaming represent 19% of total services revenue

● 79% of post-paid customers are smart device users

● Post-paid churn rate was 1.5%

Strong Performance in Mobile Business across All Areas

Delivering on CSL Integration

26

Branding

Rationalized Retail Channels

Revamped Pricing Plans

Network Enhancement

Network Integration

Branding

27

Three-brand strategy allows full coverage of the market according to

customers’ affordability and service requirements

Rationalized Retail Channels

28

9 Shops 29 Shops

41 Shops 55 Shops

Strengthening sales proposition

by consolidating retail channels and extending shop reach

* Shop numbers as at January 23, 2015

Revamped Pricing Plans

29

● CSL plans retained although a number

of low volume plans have been

removed; PCCW-HKT mobile tariffs

have been aligned

● New tariff plans introduced with the

launch of iPhone 6/6 Plus

● MTR / Tunnel / Mobile

Licence / Admin fee

increased from

HK$12 to HK$18

Adjusted Tariff Plans Simplified Pricing Structure

● Fixed price

● Choice of bandwidth

– No speed limitation

● Unlimited voice

● Unlimited Wi-Fi

● Value added services

Mobile Network Improvements after CSL Acquisition

30

U900 MOCN Activation for HKT Customers Quick Win 1

Quick Win 5 U2100 MOCN Activation for CSL Customers

Quick Win 2 Backhaul Upgrade to CSL Cell Sites

Quick Win 3 Coverage Enhancement for HKT and CSL Customers

Quick Win 4 Micro-cell Coverage for CSL Customers

Quick Win 6 Expansion of MTR Capacity for CSL Customers

network enhancements (Quick Wins) applied since CSL acquisition

to combine the strengths of HKT and CSL networks and

improve overall customer experience

Network Integration Plan

31

• Choose the best sites from both HKT and CSL networks to remove surplus

sites and enhance coverage 2014 Q4

2015 Q1

2015 Q2

2015 Q3

2015 Q4

Key Targets

• Upgrade CSL’s cell site transmission by HKT’s 1000Mbps fiber lines

• Upgrade 4G network to LTE-A supporting faster mobile broadband network

speed of up to 300Mbps

Divide Hong Kong into clusters and

grouped into zones

Network will be upgraded in different

zones according to plan

Target to complete entire network

integration by end 2015

Progress of Cell Site Integration

32

No of Sites activated

Green Zone Before After

For HKT Customers 620

780 For CSL Customers 540

Total 1160

● No of sites served HKT customers increased by 160

● No of sites served CSL customers increased by 240

● Total 380 sites in process of site termination

(i.e. about 33% of cell-sites closed)

International Business Continues to Strengthen

33

Data

Voice

Balanced mix of voice and data revenue

with focus on higher margin,

higher growth data business

51%* 49%

* Excl. retail IDD revenue

Asia

Americas

Europe and Africa

Others

Data business – Well diversified

business geographically

7%

38%

28%

27%

Stable Fixed-line Business

34

1,144 1,164 1,180 1,183 1,195 1,182 1,183 1,228 1,238 1,242 1,245

1,423 1,400 1,407 1,407 1,408 1,406 1,407 1,408 1,408 1,409 1,409

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Business Lines

Residential Lines(’000)

Solid Customer Base Maintained Since 2004

Consolidated Position in Broadband

35

Consolidated broadband market position with churn rate of around 1%

Market conditions became more challenging in H2’14 because of economic slowdown, reduced

spending in the market and competitors’ price discounting

(‘000)

1,005 1,060 1,099 1,126 1,136 1,146 1,148 1,215 1,285 1,363 1,385 1,410 1,408 1,408 1,408 1,404

104107

110 113 113 114 114115

116119 122 126 128 130 131 136

Series 1 Series 2 Series 3 Series 4 Series 5 Series 6 Series 7 Series 8 Series 9 Series 10 Series 11 Series 12 Series 13 Series 14 Series 142 Series 15

Wholesale

Business

Consumer

1,237 1,275 1,302 1,305 1,297 1,298 1,367

1,437 1,518

1,176

1,540 1,567 1,567 1,567 1,567 1,567

2007

H1 H2 H1 H2 H1 H2 H1 H1 H1 H2 H2

2008 2009 2010 2011 2012

H1

2013

H2 H2 H1

2014

H2

Wide Availability of our Fiber Network

36

* FTTB-ready means FTTH service can be available within 29 days of receiving a service order, building management access permitting

** FTTH-ready means FTTH service can be available within 4 days of receiving a service order

FTTH-ready

(80.8%)** (supporting speeds up to

1000Mbps)

(as of January 2015)

FTTB-ready (87%)* (supporting speeds of up to

100Mbps)

1.5M or above

(98%)

Continued Growth of Fiber Customers

37

Fiber-To-The-Home (FTTH) service continued to attract new

customers and existing customers for service upgrade

504K customers enjoying FTTH service as of Dec 2014,

grew 20% vs. Dec 2013

(‘000)

57

144

226

304

362

419 462

504

Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14

Growing fiber customer base creates future upgrade

opportunity to higher speed, higher price service plans

618K customer enjoying high speed service (FTTH and

VDSL) as of Dec 2014

Financial Overview

38

Profit for the year 392 599 + 53%

Effective tax rate 6% 15%

Associates and JVs 18 7

39

Summary P&L

(US$ million) 2013 2014

Revenue 3,502 4,266 + 22%

Cost of sales (1,681) (1,942)

Operating expenses (791) (998)

Depreciation & Amortization (586) (808)

Gain on disposal of property, plant and equipment 1 –

Net other gains 88 348

Non-controlling interests (150) (175)

Profit attributable to equity holders of the Company 242 424 + 76%

EBITDA 1,030 1,326 + 29%

Earnings per share (in HK cents) 25.98 45.14

Net finance costs (132) (171)

Income tax (27) (103)

Profit before income tax 419 702 + 68%

40

• Opex grew by 29% in 2014 and the opex to revenue ratio was 22%

• Increase in opex primarily at HKT, largely due to enlarged Mobile business

and one-off CSL integration expenses

15 11 9

394 432 463

149 165

351 89

96

98

28 29

26

2012 2013 2014

Core Operating Expenses

733 675

947

(US$ million)

TSS

Mobile

Media

Solutions

Others

22% 21% 22%

2012 2013 2014

Core Opex to Revenue Ratio

Opex Growth Driven by Enlarged Mobile Business

Unlocking Synergies in the Coming Periods

With CSL

23 27 32

198 202 191

40 46

123 15

26

21

14 32

43

2012 2013 2014

41 41

Demand-Driven Core Capex

333

290

• HKT’s increase in capex

due to CSL integration

• Increase in Solutions capex

mainly for data center

expansion

• Maintain 10% capex to

revenue ratio guidance

410

9.4% Core Business

Capex to Revenue Ratio: 9.8% 9.7%

(US$ million)

TSS

Mobile

Media

Solutions

Others

HKT

324 (78%)

42 42

Solid Financial Position

(US$ million)

Gross Debt (1)

Gross Debt / EBITDA(2) 3.4x 3.7x

(HKT) 3,093 3,157

(HKT)

4,724

(HKT)

3,403 3,853

5,379

2012 2013 2014

(1) Gross debt refers to the principal amount of short-term and long-term borrowings

(2) Based on gross debt as at period end divided by EBITDA for the 12-month period

(3) Based on net debt as at period end divided by EBITDA for the 12-month period

(4) Based on gross debt as at period end divided by PCCW FY13 EBITDA and CSL FY13 EBITDA

(5) Based on net debt as at period end divided by PCCW FY13 EBITDA and CSL FY13 EBITDA

(HKT)

Cash Balance (US$ million) 584 706 1,018

Net Debt / EBITDA(3) 2.8x 3.1x 2.9x (5)

3.6x (4)

500 500 500300559

154

1,500

711 300

315

38

2015 2016 2017 2018 2019 2020 2022 2023 2030

500500

500300

711

559154

1,500

300

315

38

2015 2016 2017 2018 2019 2020 2022 2023 2030

43 43

• Proactively extended the maturity profile to 2030 through issuance of a 15-year, zero coupon US$300 million bond by HKT,

allowing us to lock in long-term funding at attractive cost

• Refinancing plan to extend maturity to 6 years

• Current liquidity of US$1.7 billion in undrawn facilities across the entire group

• Effective interest rate further improved from 3% to 2.7% in 2014

Debt Maturity Profile

As at February 11, 2015

(US$ million)

Target after Refinancing

Refinancing Plan Refinancing

Plan

(US$ million)

US$ million

Cash

Balance *

Undrawn

Facilities

HKT 463 842

PCCW 239 632

PCPD 316 200

Total 1,018 1,674

* Cash balance as at December 31, 2014

HKT Bank Loans

HKT US$ Bonds

PCCW Bank Loans

PCCW US$ Bonds

44

Sustainable Dividend Policy

Interim 5.51 6.35 6.99

Final 13.55 13.85 13.21

Total 19.06 20.20 20.20

Payout Ratio

(Core NPAT) 87% 81% 78%

DPS (HK cents)

Final Dividend

Interim Dividend

(HK cents)

2012 2013 2014

13.55

5.51 6.35

13.85

6.99

13.21

• Maintain full-year dividend at

20.20 HK cents per share