Pacific Century CyberWorks (PCCW) CHEUNG KWOK KEUNG LAU HO TUNG POON WAI CHI, ALICE WONG KA NOK WONG MAN WAI, ALVIN WONG YUK KI, GIANNE By Group 2B

Pacific Century CyberWorks PCCW took over Cable & Wireless HKT - stock-and-cash transaction : US$27 billion Richard Li - The founder of PCCW

Pacific Century CyberWorks Listed in May 1999 Founded in April 1999

Pacific Century CyberWorks

Major business activities - technology related to Internet - delivery of broadband services - Internet services

Pacific Century CyberWorks Boost the stock price to HK$28.5 in February Hong Kong’s high-tech future

CyberPort Development of Hong Kong as Asia’s information, multimedia and telecommunication hub

Outline of Presentation Analyze the company Nature of PCCW’s business and its interest in broadband industry

Outline of Presentation Role and Attractiveness of CWHKT Advantages and Disadvantages of this acquisition

Analysis of PCCW Strategy Resources and Capabilities Key Success Factors

Corporate Strategy Turn into a giant Internet venture capital fund Provide hybrid Internet access and interactive TV - Hong Kong, China, Japan and India

Business Strategy PCCW formed a joint venture with CMGI Inc. Introduce the Network of World (NOW) TV channel

Business Strategy Merge TV programming with Internet content Work with cable operators to upgrade networks

Resources and Capabilities Tangible resources - strong financial background

Resources and Capabilities Intangible resources - technology - reputation

Resources and Capabilities Human resources - experienced management level

Resources and Capabilities Resources Gap - not have physical resources e.g. broadband - not experienced in provision of content

Key Success Factors Continuous expansion Strong financial background Experienced management level

What is Broadband services? Broadband - the high-speed connections or "fat pipes" - 20 times faster than standard dial-up connection - allow the next generation of multimedia content - delivered to PCs, TVs and wireless devices

Traditional telecommunication services industries Mobile IDD Standard internet dial-up services - competitive and saturated  difficult to generate more revenue in the future

Revenue sources of broadband services -Advertisements -Fees collected from e-business services -Subscription fees Broadband services industry in HK and Asia

Broadband services industry in HK and Asia (Nowadays) Customers are not willing to pay for broadband services Keen competition High investment and risk

Solution: - enter the industry earlier with well broadband network - provide attractive content - share the investment and risk with other companies - joint venture with Telstra Broadband services industry in HK and Asia (Nowadays)

Broadband services industry in HK and Asia (Future) 1. Introduction stage in the Industry Life Cycle - a lot of potential for development

Broadband services industry in HK and Asia (Future) 2. Number of Internet users is increasing in China and Asia - demand more high quality Internet services

Broadband services industry in HK and Asia (Future) 3. Keen competition will increase the quality of broadband services and lower the price - attract more and more customers Broadband services is a future trend

Broadband services PCCW should compete on - Content - Connection Build or Acquire broadband network?

Why choose to acquire? Immediately available rather than build up gradually Better to transfer technology

Cable & Wireless Hong Kong Telecom The leading provider of integrated communication services in Hong Kong Over HK$1.4 billion profit in 1999

Broadband Internet access services (CWHKT) 3.7 million fixed lines in Hong Kong Over 400,000 km of optical fibre World's largest Asynchronous Transfer Mode (ATM) broadband services network

Why choose CWHKT? Same focus: IT services

Complementary resources: 1. Cable network : broadband - high quality, fast speed Why choose CWHKT?

2. Deep market penetration and Great client base - customer loyalty Complementary resources:

Why choose CWHKT? 3. Capital: cash - financial resources for upgrading Complementary resources:

Disadvantages - huge debt Strong competition with SingTel - unreasonable high bid price - PCCW need to raise funds - issue shares and borrow money from third parties

Recommendation Broadband – future trend in Internet PCCW – enter this market early Debt of PCCW will eventually recovered Earn huge profits in the long term PCCW take over CWHKT

Background of PCCW and CWHKT Strategies Resource and Capabilities Conclusion

Key Success Factors Advantages of broadband over traditional Internet services Pros and Cons of this acquisition Conclusion

Question and Answer