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Agenda

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

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Agenda

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

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

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

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

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

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

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

  8. Transition • I. PCCW Overview • II. Transition • III. PCCW-HKT Analysis • IV. Conclusion • 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, Excite @Home)

  9. Transition • I. PCCW Overview • II. Transition • III. PCCW-HKT Analysis • IV. Conclusion • The Merger • Feb. 2000 – PCCW makes bid on HKT • Aug. 2000 – PCCW acquires HKT for US$38 billion

  10. Transition • I. PCCW Overview • II. Transition • III. PCCW-HKT Analysis • IV. Conclusion • 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?

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

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

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

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

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

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

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

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

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