PCCW trust in 'early stages' as net earnings jump 28pc

PUBLISHED : Wednesday, 23 March, 2011, 12:00am
UPDATED : Wednesday, 23 March, 2011, 12:00am

PCCW management wants to unlock more value from the company through the proposed spin-off of its telecommunications operations and its separate listing as a business trust.

'We're always looking for ways, as professional managers and members of the board, to increase the value to our shareholders - that's what we get paid to do,' group managing director Alexander Arena said, explaining the reason behind that plan.

'A business trust is just another way of potentially unlocking value for shareholders.'

PCCW on Monday announced that it was 'in the preliminary stages of exploring the feasibility of a spin-off' and that discussions were being held with the authorities about regulatory issues on the listing of the carrier's telecommunications assets as a business trust.

It will be a first for Hong Kong if rules are changed to support such a listing. Hong Kong currently allows only property trusts, while Singapore allows various trust listings.

'That was an announcement we felt we had to make, and the regulators in Hong Kong thought we had to make, to make sure that there were no surprises in the market,' said Arena, declining to comment further on PCCW's filing with the Hong Kong stock exchange.

'There is no deal. The board has taken no decisions,' he told a press conference yesterday announcing the company's results for last year. 'We simply have not developed the proposal to a point where we're able to take decisions on it and answer the very basic questions that you're asking. It's just too early.'

PCCW reported a 28 per cent increase in its consolidated net profit last year to HK$1.93 billion from HK$1.51 billion in 2009, on solid growth across its four core business segments - fixed-line, broadband, mobile and pay-television services.

Core revenue rose 3 per cent to HK$21.47 billion from HK$20.86 billion. Core earnings before interest, taxes, depreciation and amortisation - a key indicator of profitability tracked by investors and market analysts - grew 5 per cent to HK$7.07 billion from HK$6.72 billion.

However, low contribution from PCCW's majority-owned property arm, Pacific Century Premium Developments, caused the group's consolidated revenue to drop 8 per cent to HK$22.96 billion from HK$25.08 billion.

The PCCW board proposed a final dividend of 10.2 HK cents a share.

Arena said PCCW would this year pursue the development of its high-speed 4G network based on the Long-Term Evolution standard. A venture with Hutchison Telecommunications Hong Kong Holdings won a licence to offer 4G services in the city during the government's spectrum auction in January 2009.

'We have reviewed our estimates for PCCW and increased our earnings estimates for fiscal years 2011 and 2012 to reflect the positive trends we are seeing on the Hong Kong market and across PCCW's business,' Macquarie Securities analyst Lisa Soh said in a report.

The carrier's total revenue is forecast to reach HK$23.03 billion this year and HK$23.95 billion next year.

PCCW shares dropped 1.17 per cent to close at HK$3.39 yesterday.

On adopting a business-trust model in Hong Kong, Vivian Lam, a partner at law firm Paul Hastings, said the Securities and Futures Commission was expected to study the corporate governance and investor education issues before the matter was considered.

A business trust does not have a separate legal identity and is controlled by a so-called trustee manager. Investors also hold units rather than shares.

An SFC spokesman declined to comment on specific cases.

Solid growth

A strong performance of its four core business segments last year saw PCCW's consolidated net profit rise to, in HK$: $1.9b