PCCW reverses loss of customers

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PCCW, Hong Kong's largest fixed-line operator, which has been losing customers to local rivals for years, on Thursday said it had finally reversed the downward trend and recorded gains in both residential and business users in July.

The company expected growth in its core business to continue in the second half of this year and insisted average revenue per user was not declining even though it had cut prices.

?We don't talk about line loss any more. We talk about line gain,? said Alex Arena, chief financial officer.

Since losing its monopoly in fixed-line telephony in June 1995, PCCW has faced cut-throat price competition, with rivals often offering free gifts along with their services.

It began offering value-added services such as stock prices and messaging two years ago to retain users and this year tried to encourage customers to switch back by providing cheaper term-plans.

As a result, PCCW's market share dropped slightly from 68 per cent at the end of last year to 67 per cent at the end of June, although revenue from local telephony for the first half of this year still fell 10 per cent to HK$2.46bn (US$317m).

Without disclosing the figure, PCCW denied that its campaigns had lowered Arpu, a gauge of profitability, and said customers had been paying more for the new services.

?We value our revenue very, very strongly. There is no evidence . . . that we are holding market share and eroding Arpu,? Mr Arena said.

To offset sharp drops in sales of traditional phone services, PCCW has also been focusing on broadband and relying on property development to boost its revenue and bottom line.

For the six months to June, the company said turnover rose 9 per cent to HK$11.7bn, compared with HK$10.78bn a year ago, as sales at Bel-Air, a high-end real estate project, surged 52 per cent to HK$3.18bn.

Net profit jumped 25 per cent to from HK$766m last year to HK$954m in 2005, while Bel-Air contributed about HK$236m.

To attract more internet users, PCCW launched a broadband television service two years ago. Although the operation is still unprofitable, PCCW said subscriber numbers grew 63.9 per cent to 441,000. Arpu on June 30 was HK$110, compared with HK$70 a year ago.

PCCW on Thursday said it planned to buy a 50 per cent stake in a broadband venture with China Netcom, the country's second largest fixed-line operator, as part of the co-operation between the two companies after PCCW sold a 20 per cent stake to the Chinese company in April.

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