UPDATE: HK PCCW Jan-Sep Net Up 47.5%; Declares 1st Div

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Tuesday 2 November 11:36 PM

UPDATE: HK PCCW Jan-Sep Net Up 47.5%; Declares 1st Div

By Julie Wang

Of DOW JONES NEWSWIRES

HONG KONG (Dow Jones)--PCCW Ltd. (PCW), Hong Kong's dominant fixed-line telecommunications operator, Tuesday declared its first-ever dividend after saying its net profit in the first nine months of 2004 rose 47.5% on year.

PCCW posted a net profit for the nine months ended Sept. 30 of HK$1.02 billion, or 18.87 HK cents a share, up from HK$690 million, or 14.21 HK cents a share, in the corresponding period of 2003.

The rise was largely due to sales of units at Bel-Air, the residential portion of PCCW's Cyberport office-residential development on Hong Kong Island, which offset a continuing decline in revenue from its core telecom business as it lost market share.

The company's revenue for the period was HK$15.97 billion, up modestly from HK$15.94 billion last year. Its telecommunications service revenue fell 9%, but revenue from its information-technology businesses that cater to corporate clients rose 19%, while revenue from its infrastructure operations, mainly Bel-Air, jumped 32%.

"While the decline in its core business slowed down somewhat in the third quarter, it wasn't enough," ICEA Securities analyst Bertrand Chui said. "We buy stocks for growth."

PCCW said it would pay an interim dividend of 5.5 HK cents per share for the nine-month period.

With this set of earnings, Chui said some analysts are likely to slightly lower their estimates of PCCW's full-year earnings.

PCCW said its fixed-line market share fell to 69% at the end of September from 70.4% at the end of June. Meanwhile, the number of its broadband access lines at end-September were up 17% on year and its broadband television operation had signed up 367,000 users, up from 58,000 a year earlier.

The company's earnings before interest, tax, depreciation and amortization fell 15% on year to HK$4.74 billion, partly on a 21% rise in cost of sales.

Consequently, its EBITDA margin fell to 30% from 35%, and its EBITDA margin for telecommunications services dropped to 44% from 50%.

The company said the announcement of third-quarter results is a one-off, because of the declaration of a dividend. Normally, PCCW reports only first-half and full-year results.

This is the first time PCCW - headed by Richard Li, son of tycoon Li Ka-shing - has recommended a dividend since it bought its core business, fixed-line operator Hongkong Telecom, in August 2000, a move that saddled it with HK$12 billion in debt.

-By Julie Wang, Dow Jones Newswires; 852-2802-7002; julie.wang@dowjones.com

-Edited by Andrew Bullard

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