PCCW draws up ambitious Asian expansion plan after core businesses see net profit rise 23 per cent

PCCW, the flagship conglomerate of Hong Kong billionaire Richard Li Tzar-kai, has drawn up an ambitious expansion plan across Asia this year for its over-the-top (OTT) and information technology service businesses, after posting solid earnings growth last year.

“We have all the fundamentals in place,” PCCW group managing director Srinivas Bangalore Gangaiah said in a conference call on Friday.

The company is looking to widen the reach of its Viu-brand premium OTT video service in 11 markets in the region.

“Following the launch in Hong Kong, Singapore and Malaysia, Viu will have expanded presence in Indonesia and India in this first quarter,” Srinivas said.

He said the company’s information technology services arm, PCCW Solutions, would also boost its presence in mainland China and other markets in Asia to meet demand in industries including telecommunications, financial services, retail, hi-tech and media.

In a filing to the Hong Kong stock exchange on Friday, PCCW said its net profit from core operations increased 23 per cent last year to HK$2.37 billion, up from HK$1.93 billion in 2014, on the back of its strong telecommunications business.

Core revenue rose 19 per cent to HK$39.15 billion, from HK$32.96 billion in 2014.

That included the full 12-month contribution from the former CSL New World Mobility, which subsidiary HKT acquired in 2014 for US$2.43 billion.

The core businesses’ earnings before interest, taxes, depreciation and amortisation – a measure of a firm’s operating profitability – grew 16 per cent year on year to HK$12.14 billion, from HK$10.51 billion in 2014

PCCW’s core income excludes its property development and investment business, Pacific Century Premium Developments.

The group’s board of directors recommended a final dividend of 17.04 HK cents per ordinary share.

PCCW’s share price rose 4.77 per cent to close at HK$5.05 on Friday.

“While both the local and global economic outlook in 2016 appears fragile ... the group is well-positioned for sustainable growth as it continues its journey to become a major player in the region”, Srnivas said. “There will be increasing demand for content, connectivity, IT and cloud [computing] capabilities.”

That meant greater capital spending last year on its core businesses, which reached US$447 million, up from US$410 million in 2014.

A Barclays report said part of PCCW’s key investments last year also focused on preparations for the launch of its free television business.

Srnivas said free-TV subsidiary HK Television Entertainment has assembled a creative team of professionals for its launch in April.

“It has embarked on the production and acquisition of quality content to bring over 4,000 hours of fresh programming each year to Hong Kong viewers,” he said.

The combined free TV and the Viu OTT services would help PCCW in “the growing digital advertising and online subscription market”, he added.

PCCW Solutions, which contributed HK$3.59 billion in revenue to the group, had secured orders worth US$690 million at the end of December.

Srnivas said the goal was to build that business unit’s expertise this year to fully serve mainland China’s vast manufacturing sector and its growing health-care-related enterprises.