It has been a while coming, but a set of strong results for the telecoms giant will be in line with analysts' forecasts For the first time since it took over fixed-line giant Cable & Wireless HKT 31/3 years ago, analysts are upbeat on PCCW's full-year earnings, expecting last year's business initiatives to have stemmed market-share losses and property sales to have provided a positive cash flow. According to a Thomson First Call consensus, analysts are forecasting that the dominant fixed-line giant will post a net profit of HK$1.65 billion for last year after three consecutive years of disappointing earnings. Sales revenue is expected to have grown by 7.71 per cent to HK$21.66 billion for the year to December, compared with a decline recorded for 2002, according to the consensus. Cash contributions from the firm's non-core property project Residence Bel-Air will have been a key component of PCCW's expected-to-have-improved earnings for last year, due to be released on Thursday. DBS Vickers Securities' Wallace Cheung, who forecasts that last year's net profit at PCCW will have been HK$2.18 billion, believes the firm will provide positive surprises from its Cyberport project and exceptional gains on its investment portfolio. He expects sales of units in Residence Bel-Air to have contributed HK$273 million in profit to the company last year. He also thinks the carrier will book a $252 million exceptional gain on its investment portfolio for the second half of the year. Most analysts are expecting to see a continued decline in PCCW's core telecommunications business due to a 10 percentage point drop in market share to 72 per cent last year, although they anticipate PCCW's market share will stabilise at this level. Daiwa Institute of Research's Jenny Szeto estimates that PCCW's total revenue for last year will have fallen 9 per cent to HK$18.27 billion if Residence Bel-Air pre-sale revenue is excluded, which contrasts to the 14 per cent growth in total revenue to $23.01 billion she forecasts if property sales are included. Increasing optimism on the dominant fixed-line carrier's business outlook was bolstered by a stabilising of market share losses, achieved through new business initiatives such as the 'new generation' short-messaging fixed-line service and broadband pay-television, as well as an improving economy. PCCW has indicated that both SMS fixed-line and pay-television subscriber gains have outpaced the company's targets. Credit Suisse First Boston (CSFB) has forecast that PCCW's phone line defections will have slowed to 164,000 in the second half of last year, compared with a loss of 205,000 lines in the first half. The brokerage firm expects PCCW's market share loss this year to further slow - to 239,000 lines, compared with the 369,000 lost throughout last year. 'In our view, PCCW's core telecom revenue is likely to begin to stabilise this year, mainly helped by the broadband business, though a modest decline is still expected,' BOC International analyst Allan Ng said. But not all analysts are optimistic about PCCW's outlook. ICEA put a 'sell' recommendation on the counter, voicing concerns that its undersea cable joint venture will weigh on profits. Telstra Corp has recently indicated it is considering injecting A$65 million (HK$388.57 million) into Reach to meet certain financial commitments. Including ICEA, Daiwa, UBS and CSFB, several brokerage firms have raised concerns that PCCW might need to inject its own top-up cash into Reach, 50 per cent of which belongs to PCCW. They are also concerned about possible write-downs on the carrying value of the distressed asset. 'PCCW will have to explain how it can sustain Reach's estimated HK$3.5 billion carrying cost on the balance sheet, while Telstra had to make a full investment write-off last year,' ICEA said in a stock report. CSFB believes a Reach write-off, estimated by the brokerage to require about HK$3.2 billion in cash input, would have a big impact on PCCW's earnings and could potentially push back the timing of PCCW's dividend policy by one or two years as the carrier's equity status has already fallen into negative territory.