PCCW sheds staff, upgrades Internet strategy

Headed by 34-year-old tycoon Richard Li, PCCW announced an Internet strategy to restore investor faith

By staff and wire reports

HONG KONG, China -- Internet and telecom firm PCCW unveiled a revamp of its consumer Internet strategy on Wednesday in a bid to win back investor confidence.

The Hong Kong company said its plans to cap consumer Internet investments at $190 million and leverage existing assets in Hong Kong, with any regional expansion going forward only under strict financial limits.

The strategy was revealed after the market close in Hong Kong. Nevertheless, news of imminent restructuring in PCCW's Internet unit sent the company's shares soaring up 7.78 percent on Wednesday to close at HK$2.425.

Headed by 34-year-old tycoon Richard Li, PCCW earlier on Wednesday said it would axe 340 jobs in an effort to reduce costs.

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Li also said the telecom giant expects its Internet services division to break even on a cash flow basis by December 2003, with a separate listing in store by the end of 2003.

Restoring faith

PCCW also said it expects its subscribers for broadband Internet services and interactive TV to grow to over 500,000 in 2003 from 230,000 at the end of 2000.

PCCW currently has the highest number of broadband subscribers in Hong Kong.

"The Internet Services strategy supports our core business objective to maintain margins and group EBITDA [earnings before interest, taxation, depreciation and amortization]," said Li.

"Our Internet Services strategy is designed to provide a value-added service for broadband, which is a key source of growth for the company."

PCCW's stock price has shed 85 percent of its value in the last year, a loss fueled by souring market sentiment towards tech plays and general confusion about the company's strategy.

Though today's announcement articulated the telco's Internet services agenda, analysts say it may not be enough to restore faith in the battered firm.

"We're seeing some buying in PCCW today on hope the company will restructure its Internet business to provide anew revenue source," Y.K. Chan of CEF Securities told Reuters.

"But I don't think this will have a long-lasting impact on the stock price and it will become stagnant again."

A new fate for NOW

PCCW also said it would cap spending on its consumer Internet initiatives at $190 million, in contrast to the $200 million announced previously.

The changes clearly affected PCCW's struggling Network of the World (NOW) Internet and television service.

Once the centerpiece of the company's dreams of worldwide broadband domination, NOW found difficulty in attracting audiences and generating revenue.

The company now plans to introduce a subscription-based version of NOW on the Web at Now.com.hk.

Now.com.hk will provide content for the Hong Kong market, with revenues to come from both subscriptions and pay-per-view.

Content partners of the Now.com.hk service will be announced at the launch of the service.

Reuters contributed to this report.