1. PACIFIC CENTURY Presented by Group 1B

2. PACIFIC CENTURY Agenda 1)Background of PCCW 2)Industry Life Cycle 3)Key Strategies -Where to compete -How to compete -Business Model 4)Potential sustainable advantages 5)Major competitors 6)Recommendation 7)Conclusion April Maggie Angel Isabel April

3. PACIFIC CENTURY PCCW Background Technology flagship of Pacific Century Group Founded in 1993 Listed in Hong Kong in May 1999 3 main subsidiaries –Pacific Convergence Corporation –Cyberport –Cyberworks Ventures

4. PACIFIC CENTURY Pacific Century Group Pacific Century Cyberworks Cyberports Cyberworks Ventures Pacific Convergence Corporation Organizational structure of PCCW

5. PACIFIC CENTURY PCCW Background Core business –Internet Industry Broadband service ISP-enabling service Broadband Service ISP- Enabling service Internet Industry

6. PACIFIC CENTURY PCCW objectives A leader in Internet Infrastructure, content and service Leader Internet Infrastructure Internet Content Internet Service

7. PACIFIC CENTURY PCCW Strategy Turn into giant Internet venture capital fund Provide hybrid Internet access and interactive television in SE Asia to be a leader in internet industry

8. PACIFIC CENTURY PCCW Performance Began the service roll-out of NOW2000 Jun Entered into the agreement of “Cyberport” with Government 2000 May Formed a Joint Venture with CMGI2000 Jan Established CyberWorks Ventures1999 Aug Listed in Hong Kong1999 May Bought a telecommunications- equipment distributor 1999 Apr

9. PACIFIC CENTURY Internet Industry Broadband Introduction Growth Industry sales time I ntroductio n Growth Maturity Decline Internet Industry Dial-up Service Maturity Decline Industry Life Cycle

10. PACIFIC CENTURY Life Cycle Pattern Life cycle regeneration –Dial-up –Broadband Sales Time Dial-up Broadband

11. PACIFIC CENTURY Key Strategic Issues – Where to compete A)Which Service? Advantages – High Speed – More reliable – Support more content – Interactive

12. PACIFIC CENTURY Where to compete B) Which Geographic Market? 1)Limited Broadband Users Singapore - 1 Million Internet users - 35,000 Broadband subscribers Hong Kong - 400,000 narrowband subscribers - 60,000 Broadband subscribers

13. PACIFIC CENTURY Where to compete 2)High Operating Costs China - PCCW need to lower its operating cost - need to open internet market Unfavorable?

14. PACIFIC CENTURY Favorable Factors 1)High Potential Demand Life cycle theory - demand for new technology: advanced industrialized countries developing countries Where to compete

15. PACIFIC CENTURY 2) Fast growing telecommunication industry - China - large potential market - large population Where to compete High potential revenue

16. PACIFIC CENTURY 3) Risk-accepting Population - Hong Kong - more likely to adopt innovation - higher living standard Where to compete High potential to use broadband

17. PACIFIC CENTURY

18. Improving content –Key success factor –NOW offers 8 web channels –Interactive content Improving connection infrastructure –Cable modem, optical fiber network and satellite –NOW : satellite How to compete

19. PACIFIC CENTURY Joint Venture –Share risk and return –Pooling of resources and capability How to compete Improve content and infrastructure Improve innovation

20. PACIFIC CENTURY Business Model How to generate revenue? –Internet Subscription fees for Broadband connection Internet Advertising E-Business –Venture Capital

21. PACIFIC CENTURY Sustainable Advantages Complementary Resources –Financial Resources By issuing shares in May 1999 Raised 1.3 billions

22. PACIFIC CENTURY Sustainable Advantages Complementary Resources –Complementary Technologies By joint ventures e.g. CMGI Shared technologies and information

23. PACIFIC CENTURY Sustainable Advantages High complexity of internet industry –Unique capabilities of TV, PC and World Wide Web –Difficult to be copied

24. PACIFIC CENTURY Sustainable Advantages Lead Time –Enough fund by issuing shares –large scale investments High barrier Beneficial to be a potential leader

25. PACIFIC CENTURY Sustainable Advantages The presence of technical standards –Early mover –The Network of the World (NOW) and broadband services –Enough resources High barrier Beneficial to be a potential leader

26. PACIFIC CENTURY PCCW’s Competitors I-Cable Communications Ltd –Hong Kong company –Second largest broadband network –TV system operator Siti Company –Indian company –Cable rights and rights for new movies

27. PACIFIC CENTURY PCCW’s Competitors KDD Winstar Corporation –Japanese company –Technical expertise Star TV –30 channels in seven languages

28. PACIFIC CENTURY PCCW’s Competitors Hong Kong Telecom –Hong Kong company –One of the largest telecommunications companies in Asia –Leading provider of integrated communications services –Network infrastructure e.g. iTV

29. PACIFIC CENTURY Recommendation Acquisition of Hong Kong Telecom

30. PACIFIC CENTURY Pros Reduced competition Complementary resource Increased Asset First step for globalization Diversification

31. PACIFIC CENTURY Complementary Resources Strong Cash Flow EBITDA of nearly 6 Billion 70% of Hong Kong Household fully digital fiber optic broadband network ATM broadband interactive TV Core technology Complementary technologies Finance Distribution Customer service

32. PACIFIC CENTURY Diversification Narrowband and Broadband Internet access Interactive multimedia service Fixed and wireless voice service leased circuits Others

33. PACIFIC CENTURY Globalization Network with other Asia Countries Asia Pacific Cable Network 2

34. PACIFIC CENTURY Cons Difficulties in control and manage High debt of Hong Kong Telecom

35. PACIFIC CENTURY Recommendation Declining in IDD business Huge investment results in high risk –Leader or follower –In depth Analysis for the market Importance in globalization

36. PACIFIC CENTURY Conclusion

37. PCCW Good prospect in SE Asia Broadband Service PCCW has high potential to be a leader Reasons: limited capabilities e.g. lead time advantages Complementary resources Technical standard Acquire HKT to conquer HK market

38. PACIFIC CENTURY Thank You Comments & Questions