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Presented by Group 1B

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Agenda1) Background of PCCW2) Industry Life Cycle3) Key Strategies

-Where to compete-How to compete-Business Model

4) Potential sustainable advantages5) Major competitors6) Recommendation7) Conclusion

April

Maggie

Angel

IsabelApril

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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

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Pacific Century Group

Pacific Century Cyberworks

CyberportsCyberworks

VenturesPacific Convergence

Corporation

Organizational structure of PCCW

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PCCW Background• Core business

– Internet Industry• Broadband service

• ISP-enabling service

BroadbandService

ISP-Enablingservice

InternetIndustry

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PCCW objectives• A leader in Internet

Infrastructure, content and service

Leader

InternetInfrastructure

InternetContent

InternetService

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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

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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

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Internet IndustryBroadband

Introduction

Growth

Indu

stry

sa

les

time

Introduction Growth Maturity Decline

Internet IndustryDial-up Service

Maturity

Decline

Industry Life Cycle

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Life Cycle Pattern

• Life cycle regeneration– Dial-up– Broadband

Sal

es

Time

Dial-up

Broadband

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Key Strategic Issues – Where to compete

A) Which Service? • Advantages– High Speed– More reliable– Support more conten

t– Interactive

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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

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Where to compete

2) High Operating CostsChina

- PCCW need to lower its operating cost

- need to open internet market

Unfavorable?

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• Favorable Factors

1) High Potential Demand Life cycle theory - demand for new technology:

advanced industrialized countries

developing countries

Where to compete

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2) Fast growing telecommunication industry

- China - large potential market

- large population

Where to compete

High potential revenue

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3) Risk-accepting Population

- Hong Kong - more likely to adopt innovation

- higher living standard

Where to compete

High potential to use broadband

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• 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

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• Joint Venture– Share risk and return– Pooling of resources and capability

How to compete

Improve content and infrastructure

Improve innovation

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Business Model

• How to generate revenue?– Internet

• Subscription fees for Broadband connection• Internet Advertising• E-Business

– Venture Capital

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Sustainable Advantages

• Complementary Resources– Financial Resources

• By issuing shares in May 1999

• Raised 1.3 billions

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Sustainable Advantages

• Complementary Resources– Complementary Technologies

• By joint ventures e.g. CMGI• Shared technologies and information

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Sustainable Advantages

• High complexity of internet industry– Unique capabilities of TV, PC and

World Wide Web

– Difficult to be copied

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Sustainable Advantages

• Lead Time – Enough fund by issuing shares– large scale investments

High barrier Beneficial to be a potential leader

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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

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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

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PCCW’s Competitors

• KDD Winstar Corporation– Japanese company– Technical expertise

• Star TV– 30 channels in seven languages

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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

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Recommendation

• Acquisition of Hong Kong Telecom

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Pros• Reduced competition• Complementary resource• Increased Asset• First step for globalization• Diversification

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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

Complementarytechnologies

FinanceDistribution

Customer service

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Diversification• Narrowband and Broadband

Internet access

• Interactive multimedia service

• Fixed and wireless voice service

• leased circuits

• Others

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Globalization

• Network with other Asia Countries

• Asia Pacific Cable Network 2

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Cons

• Difficulties in control and manage

• High debt of Hong Kong Telecom

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Recommendation

• Declining in IDD business• Huge investment results in high

risk – Leader or follower– In depth Analysis for the market

• Importance in globalization

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Conclusion

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

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Thank You Comments & Questions