A pedestrian walks past a PCCW phone booth in Hong Kong early this month. The city's dominant landline phone company reported a 15 percent drop in 2008 net profit mainly due to rising costs. AFP

HONG KONG: PCCW Ltd last night reported a 15 percent year-on-year drop in 2008 net profit to HK$1.27 billion despite a hefty 35 percent jump in consolidated revenue.

Hong Kong's dominant fixed line operator attributed the decline in earnings to a spike in operating costs, escalation in revaluation losses on its investment properties and increased provision for other investments.

The group, controlled by tycoon Li Ka-shing's younger son Richard, said last year's operating costs - before depreciation, amortization and restructuring costs - rose 4 percent to HK$6.12 billion from HK$5.88 billion in 2007.

Depreciation and amortization expenses rose 13 percent to HK$3.7 billion due mainly to higher customer acquisition costs.

It said it incurred a revaluation loss of HK$396 million on its investment properties, a sharp contrast to a HK$3 million revaluation gain in 2007.

PCCW said provision for impairment of investments surged to HK$161 million from HK$60 million a year earlier.

Overall revenue was healthy as it expanded 35 percent to HK$31.95 billion from HK$23.72 billion in 2007, following a spike in contributions by unit Pacific Century Premium Developments (PCPD) which undertakes luxury residential projects.

PCPD posted a 217 percent year-on-year surge in its revenue to HK$9.94 billion, due principally to sales of luxury apartments at its upmarket Bel-Air residential project on Hong Kong Island.

Excluding PCPD's contribution, the revenue that PCCW generated from its core telecom and related business rose 7 percent to HK$22.01 billion, thanks to higher contributions from its TV & Content and Mobile businesses.

PCCW's telecom services and its solutions businesses posted steady growth and also made significant contributions to overall revenue.

Core EBITDA (earnings before interest, tax, depreciation and amortization) for the year rose marginally by 3 percent to HK$6.71 billion, while consolidated EBITDA rose 9 percent to HK$7.98 billion.

Earnings per share for the year were 18.78 HK cents, down from 22.21 HK cents the previous year.

The company said the board of directors decided to defer its consideration of the grant to shareholders of a final dividend due to the ongoing court proceedings relating to a proposal by majority shareholders to take the company private.

PCCW paid a final dividend of 13.5 HK cents in 2007.

The Court of Appeal is still hearing a petition which seeks to overturn a High Court decision which earlier approved the privatization of the telecom giant.

Justice Anthony Rogers yesterday again questioned the company's vote on privatization, saying that it would create havoc in future.

PCCW said its core operation - the telecommunication services segment - posted a 4 percent decline in operating profit to HK$5.12 billion, while EBITDA remained stable at HK$7.46 billion. Revenue from the segment increased 5 percent to HK$17.47 billion.

At the end of 2008, the number of its total fixed-line users increased marginally by about 1 percent to approximately 2.6 million, with a marginal decline in average revenue per user (ARPU).

Meanwhile, total mobile subscribers expanded 23 percent to 1.31 million. The 3G subscriber base more than doubled to 414,000, while the 2G subscriber base expanded 4 percent to 899,000 over the year.

The 3G ARPU in December was stable compared to a year ago at HK$216 while the blended 2G and 3G post-paid ARPU also remained stable at HK$153.

(HK Edition 04/22/2009 page16)