Agenda I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW Overview PCCW Cyberport Cyberworks Ventures Pacific Convergence Corporation I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW Overview Pacific Convergence Corporation Broadband access provider Broadband content provider via NOW (Network of the World) I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW Overview Cyberport Real estate venture contracted by the HK government Information, Multimedia, and Telecommunications hub I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW Overview Cyberworks Ventures Internet venture capital firm / incubator Over 100 companies in their portfolio worth approximately US$1 billion I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW Overview Core Business (Pre-HKT Merger) Strategy of core business: Build a diverse portfolio of Internet companies with strong technological capabilities, thus positioning PCCW as the gateway for Internet businesses entering Asia Focus on Cyberworks Ventures arm NOW channel is under development I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

Transition Shift in Focus Internet Investments Broadband I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

Transition Factors Leading to Shift in Focus Internet stock prices plummeting IPO market drying up Broadband use increasing Wave of content-access mergers (AOL-Time Warner, I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

Transition The Merger Feb – PCCW makes bid on HKT Aug – PCCW acquires HKT for US$38 billion I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

Transition Strategy Behind PCCW-HKT Merger Shift in focus presents need for broadband infrastructure and expertise Pressure to generate a stable source of revenue because of NOW’s growing pains Strategic intentions or Impulse buy? I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW-HKT Analysis Core Business (Post-HKT Merger) Strategy of core business: To become the world’s largest provider of broadband Internet content via NOW and high-speed Internet access Focus on Pacific Convergence Corporation arm Signs of progress –NOW channel launches in Hong Kong –Deal signed with Indian ISP, Data Access I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW-HKT Analysis Key Success Factors License or create compelling content for target market Build strong partnerships with: –Cable TV operators –Telephony operators Complementary resources needed, such as distribution, marketing, and complementary technologies. I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW-HKT Analysis Competitive Advantages Li family influence Largest telecommunications infrastructure in Hong Kong Broadband network that reaches 70% of Hong Kong households Human Resources –Expertise in broadband access –Seasoned management team I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW-HKT Analysis Challenges Direct competition NOW = No One Watching – Weak content library – Programs are currently in English only Broadband in Asia has yet to be widely adopted I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW-HKT Analysis More Challenges Financial hardships –Dead money in Cyberworks Ventures portfolio –Debt from acquiring HKT Investors skepticism Faltering reputation Deregulation of telecommunications industry in Hong Kong I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW-HKT Analysis Recommendations Focus on content –Continue acquiring compelling content –Develop the current eight “web channels” –Regionalize content, making it difficult to imitate Continue seeking partnerships with connectivity operators in Asia I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

PCCW-HKT Analysis More Recommendations Sell off unnecessary assets to: –Refocus and strengthen core business –Pay off debt Increase transparency of company’s business model Identify and exploit potential synergies between all aspects of PCCW I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion

Conclusion Logical shift in PCCW’s business focus Current competitive advantages are outweighed by the number and severity of challenges Public had little faith at start of Richard Li’s Star TV, which is now a satellite broadcasting powerhouse. I. PCCW Overview II. Transition III. PCCW-HKT Analysis IV. Conclusion