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March 30, 2006 2:21 am

PCCW takes cautious stance on 3G investing

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Richard Li, chairman of PCCW, Hong Kong?s largest fixed-line operator, yesterday said the company would not invest heavily in 3G because of soft demand for the technology.

In sharp contrast with the upbeat picture of the technology painted by Hutchison Whampoa ? the conglomerate controlled by his father Li Ka-shing ? Richard Li said many high-end mobile users were still using 2G phones because they were unwilling to pay extra for 3G services.

?You need to know where the demand is. From what we are seeing, customers will not pay more just to use video phone. For streaming TV or information downloads, they will only use it when they find it useful,? Richard Li said.

Hutchison, which has invested more than ?20bn (US$24bn) in 3G worldwide, is the world?s biggest investor in the technology and argues it is the future of telecoms.

Last week, Li Ka-shing said he had strong confidence in the company?s 3G business, which reported losses of HK$26.88bn (US$3.5bn) last year.

PCCW last year acquired Sunday Communications, a local wireless operator, to become an integrated operator with fixed-line, mobile, broadband and pay-TV services. It launched a free 3G trial for 110,000 users inJanuary.

Richard Li said yesterday: ?Unlike other companies, we do not believe in investing in 3G and incurring losses. We believe that there is an attraction compared with 2G. But we don?t believe it is so overwhelming that we would incur big losses on it.?

Announcing its results yesterday, PCCW also said its core fixed-line business turned round in the second half of last year, with 50,000 new lines added compared with 53,000 lost in the first half.

Although the company insisted it was not gaining new business at the expense of revenue, turnover in local telephony services for 2005 dropped 10 per cent to HK$4.86bn last year.

The company said it also expected its pay-TV operation to break even on an earnings before interest, depreciation, tax and amortisation basis by the end of 2006.

The operation had 549,000 customers at the end of last year.

Among them, 71 per cent were paying users, who spent an average HK$114 a month in the second half of last year, compared with HK$110 in the first half.

PCCW?s net profit rose 2.5 per cent to HK$1.6bn last year despite revenue falling 2 per cent to HK$22.5bn.

The company said the fall in sales was due to a delay in recognition of revenue from property sales because of a change in accounting policy.

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