PCCW video-streaming unit raises US$110m from Hony Capital, Foxconn and Temasek

The video-streaming subsidiary of Hong Kong telecommunications and media giant PCCW has raised a US$110 million investment from Chinese private equity firm Hony Capital, Foxconn Ventures and a unit of Singapore’s Temasek Holdings.

PCCW, the flagship company of tycoon Richard Li Tzar-kai, announced that development on Thursday, after it reported a significant increase in core net profit in the six months ended June 30.

The company’s core operations excludes its property development and investment business, Pacific Century Premium Developments.

Hony Capital, Foxconn Ventures and Temasek’s Anderson Investments agreed to subscribe to 11 million so-called preference shares, which represent 18 per cent of the enlarged share capital of PCCW OTT.

This PCCW subsidiary provides over-the-top video-streaming services, which are delivered over the internet, under the Viu and Vuclip brands in 24 markets around the world.

“Bringing in Hony Capital, Foxconn Ventures and Temasek as investors will support PCCW OTT’s efforts to grow in its existing markets, as well as to explore other attractive markets,” PCCW group’s managing director, Bangalore Gangaiah Srinivas, said during a presentation to analysts on Thursday.

Hony Capital was also granted an option to subscribe for up to a further 2 million preference shares at US$10 per share. Once exercised, the three investors would hold a total of 20.6 per cent of the enlarged share capital of PCCW OTT.

Proceeds from the new investment will be used by PCCW OTT to bring more locally relevant and original content to the markets where it operates, as well as for technologies to support innovative product development, according to Srinivas.

A report by Citi Research said PCCW “has a track record of driving solid non-telecoms business growth and could leverage on group resources to improve profitability”.

PCCW lived up to this in the first half, posting a 38 per cent increase in interim net profit for its core operations to US$183 million, up from US$133 million in the same period last year.

That increase was achieved on the back of the firm’s £300 million (US$389.9 million) disposal of Transvision in May. Transvision’s sole asset was British wireless network operator UK Broadband.

PCCW’s core interim earnings before interest, taxes, depreciation and amortisation – a measure of a firm’s operating profitability – saw a modest gain in the first half to US$737 million from US$735 million a year earlier.

Its core revenue, however, declined 5 per cent to US$2.2 billion, compared with US$2.4 billion the previous year, because of a slowdown in smartphone sales at telecommunications subsidiary HKT.

Srinivas said PCCW “will remain prudent and vigilant” as it “strives for renewed growth in the coming quarters”.

Ahead of its results announcement, PCCW’s share price slipped 0.67 per cent to close at HK$4.44 on Thursday.