Navigating the Internet Industry: PCCW's Strategic Advantages and Competitor Landscape

1. PACIFIC CENTURY CYBERWORK Presented by Group 1B

2. Background of PCCW Industry Life Cycle Key Strategies -Where to compete -How to compete -Business Model Potential sustainable advantages Major competitors Recommendation Conclusion April Maggie Angel Isabel April Agenda

3. 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 Group Pacific Century Cyberworks Pacific Convergence Corporation Cyberworks Ventures Cyberports Organizational structure of PCCW

5. PCCW Background • Core business • Internet Industry • Broadband service • ISP-enabling service Internet Industry Broadband Service ISP- Enabling service

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

7. 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. 1999 Apr Bought a telecommunications-equipment distributor 1999 May Listed in Hong Kong 1999 Aug Established CyberWorks Ventures 2000 Jan Formed a Joint Venture with CMGI 2000 May Entered into the agreement of “Cyberport” with Government 2000 Jun Began the service roll-out of NOW PCCW Performance

9. Internet Industry Broadband Introduction Growth Internet Industry Dial-up Service Maturity Decline Industry Life Cycle Industry sales Introduction Growth Maturity Decline time

10. Sales Broadband Dial-up Time Life Cycle Pattern • Life cycle regeneration • Dial-up • Broadband

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

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

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

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

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

17. Favorable prospect in Asia

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

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

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

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

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

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

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

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

26. 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. PCCW’s Competitors • KDD Winstar Corporation • Japanese company • Technical expertise • Star TV • 30 channels in seven languages

28. 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. Recommendation • Acquisition of Hong Kong Telecom

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

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

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

33. Globalization • Network with other Asia Countries • Asia Pacific Cable Network 2

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

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

36. Conclusion

37. PCCW Broadband Service Good prospect in SE Asia 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. Thank You Comments & Questions