Fixed-line losses continue amid advanced negotiations with China Netcom Fixed-line carrier PCCW, eager to please investors amid continued erosion of its core voice business, yesterday pledged to pay its first dividend after reporting a 14.5 per cent rise in first-half earnings. The dominant operator will pay 5.5 HK cents per ordinary share by November 30, barring 'unforeseen circumstances', deputy chairman Jack So Chak-kwong said. Revenue was flat at HK$10.72 billion. Operating profit dropped 15.47 per cent to $1.99 billion, due to continued line losses. Net profit, however, climbed to HK$805 million from $703 million, as the company lowered tax, finance, operating and depreciation and amortisation costs. Another key factor was sales of its luxury residential project Residence Bel-Air at Cyberport, which contributed HK$2.09 billion in revenue during the period, up 44.85 per cent. Although PCCW had earlier declared its intention to pay a dividend, several market watchers were expecting none. Macquarie analyst Craig Irvine, in a research note before the earnings release, said a dividend would be 'imprudent' as it would drag out paying down the company's US$3.78 billion in net debt. Celestial Asia Securities head of research Herbert Lau said: 'The dividend is quite generous, given that it is only the interim.' Mainland telecommunications firms typically pay a dividend yield of just above 1 per cent for the full year, while PCCW is paying 1 per cent on a half-year basis. Mr So declined to provide details on talks with mainland carrier China Netcom, which wants to buy a stake in PCCW's fixed-line operations. He reiterated that the negotiations were in advanced stages. A deal would give the company access to the southern China market - in particular broadband services - but analysts have strained to imagine benefits for Netcom, which would be buying a business that is losing customers. Mr So spoke of synergies between the pair: 'I think they need a competent, experienced partner.' What remains unclear, however, is why Netcom would need to acquire an equity stake in PCCW's fixed-line business to gain the company's broadband expertise when a simple partnership would do. Revenue from local voice services dropped 12.53 per cent to HK$2.68 billion. The company lost 117,000 lines during the period, while market share fell an estimated 2.6 percentage points to 70.4 per cent. PCCW had some success in slowing customer defections, thanks to its next-generation services, which allow users to send short text messages over a fixed line. The firm had 849,000 users of the service, up from 655,000 at the end of last year. Customer churn fell 61 per cent to about 15,000 residential lines per quarter. PCCW also highlighted growth in its NOW Broadband TV division, which had 316,000 users, compared with 205,000 at the end of last year. It declined to disclose average revenue per user. The company has been bundling NOW free with its broadband internet access service Netvigator, leading market watchers to question how much the service is earning. PCCW said NOW had been a good customer retention tool, noting its churn rate for Netvigator was down to 1 per cent. NOW had also been instrumental in winning Netvigator customers, which grew 21.3 per cent to 558,000.