Annual Report 2017 1 CORPORATE PROFILE (CONTINUED)
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CONTENTS 1 Corporate Profile 3 Statement from the Chairman 4 Statement from the Group Managing Director 8 PCCW in Numbers 10 Significant Events in 2017 12 Awards 16 Key Figures 17 Board of Directors 24 Corporate Governance Report 40 Management’s Discussion and Analysis 51 Financial Information 216 Investor Relations A1 Appendix – Environmental, Social and Governance Report CORPORATE PROFILE PCCW Limited is a global company headquartered in Hong Kong which holds interests in telecommunications, media, IT solutions, property development and investment, and other businesses. The Company holds a majority interest in the HKT Trust and HKT Limited, Hong Kong’s premier telecommunications service provider and leading operator in fixed- line, broadband and mobile communication services. HKT meets the needs of the Hong Kong public and local and international businesses with a wide range of services including local telephony, local data and broadband, international telecommunications, mobile, and other telecommunications businesses such as customer premises equipment sale, outsourcing, consulting, and contact centers. PCCW also owns a fully integrated multimedia and entertainment group in Hong Kong, PCCW Media. PCCW Media operates the largest local pay-TV operation, Now TV, and is engaged in the provision of OTT (over-the-top) video service under the Viu brand in Hong Kong and other places in the region. Through HK Television Entertainment Company Limited, PCCW also operates a domestic free television service in Hong Kong. Also wholly-owned by the Group, PCCW Solutions is a leading information technology outsourcing and business process outsourcing provider in Hong Kong and mainland China. In addition, PCCW holds a majority interest in Pacific Century Premium Developments Limited, and other overseas investments. Employing over 24,000 staff, PCCW maintains a presence in Hong Kong, mainland China as well as other parts of the world. PCCW shares are listed on The Stock Exchange of Hong Kong Limited (SEHK: 0008) and traded in the form of American Depositary Receipts (ADRs) on the OTC Markets Group Inc. in the U.S. (Ticker: PCCWY). To learn more about our core businesses, please turn over the page. PCCW annual report 2017 1 CORPORATE PROFILE (CONTINUED) HKT is Hong Kong’s leading operator in fixed-line, broadband and mobile communication services. NETVIGATOR is Hong Kong’s largest broadband service provider with its fiber network covering 88.3% of buildings and 85.6% of homes in Hong Kong. CSL Mobile operates the csl and 1O1O mobile service brands. The share stapled units of the HKT Trust and HKT Limited are listed on The Stock Exchange of Hong Kong Limited. Now TV is Hong Kong’s largest pay-TV provider, offering a wide range of local and international content through linear TV channels, on-demand and via OTT (over-the-top) apps. The media group also operates an international OTT media entertainment business in 27 markets globally, which includes the Viu and Vuclip video streaming services and the MOOV music streaming service. Viu is a leading video service in the region offering premium content for viewers. Vuclip provides web-based and short-form video content for emerging markets. MOOV is a popular lossless music digital streaming service in Hong Kong. Domestic free TV service ViuTV offers original format factual entertainment content as well as dramas, news, children and sports programs on its Cantonese channel 99 and English language channel ViuTVsix channel 96. PCCW Solutions is a leading IT services provider in Hong Kong and mainland China which helps customers achieve their business goals and transform digitally with a wide range of digital services and solutions, IT and business process outsourcing, cloud computing, system development and solutions integration, data centers, hosting and managed services, e-commerce and IoT (Internet-of-Things) solutions. PCCW Solutions has been playing a key role in supporting critical IT systems in the public sector of Hong Kong, for example, the Next Generation Smart Identity Card System (SMARTICS-2) and the Next Generation Electronic Passport System (e-Passport 2) for the Immigration Department. In addition to the Greater China area, PCCW Solutions has offices in Singapore and the Philippines. 2 PCCW annual report 2017 STATEMENT FROM THE CHAIRMAN I am pleased to report that the core businesses of PCCW The overseas property projects of Pacific Century achieved satisfactory operational results for the year Premium Developments (PCPD) are proceeding as ended December 31, 2017. planned. The majority of tenants are expected to move into Pacific Century Place Jakarta, which has leased The media segment in Hong Kong in the past year 69% of its office space, from the beginning of this year. was highly dynamic. Our leading digital media services As for the hotel and residences project in Hokkaido, comprising Now TV, Viu OTT (over-the-top), and ViuTV Japan, PCPD plans to launch the units in phases in remained focused on strengthening their content Asia over the next two years. In Hong Kong, PCPD will propositions, enhancing customer experience, and redevelop with a joint venture partner a prime site in reaching out to more viewers. Central into a high-end property. Notably, Now TV and ViuTV announced in November Lastly, I would like to pay our most sincere tribute rights to exclusively broadcast in Hong Kong the FIFA to Sir David Ford, who passed away in the U.K. last World Cup in summer 2018. In addition to world-class September. Sir David joined the Board of PCCW in sports, Now TV continued to reinforce its pay-TV market 2002 and made a significant and lasting contribution leadership during the year with a variety of international with his invaluable advice on the company’s operational and Asian TV series and movies on multiple platforms, and development strategies, as well as its corporate and via enriched video-on-demand program offering. governance. Mr. David Lawrence Herzog was appointed as an Independent Non-Executive Director with effect Viu OTT has gained further traction in the Southeast from October 9. Asian markets having introduced Viu Original productions in Chinese, Indian, and Indonesian languages, as well as expanded offerings of Asian movies, thereby creating momentum for growth in subscription and advertising. ViuTV launched an English channel during the year. ViuTV is committed to offering viewers more quality free television program choices. PCCW Solutions continued to benefit from the digital Richard Li transformation of enterprises and serve the needs Chairman of the public sector for critical IT systems, such as a February 7, 2018 major contract in the second half to supply the Next Generation Electronic Passport System in Hong Kong. After securing ground-breaking deals in several new markets in Southeast Asia, PCCW Solutions opened a new office in Singapore in December. HKT reported a satisfactory performance and a continued growth in AFF (adjusted funds flow) for the year. The broadband and mobile communications businesses continued to achieve steady results despite intense competition throughout the year. PCCW annual report 2017 3 STATEMENT FROM THE GROUP MANAGING DIRECTOR In an ever expanding digital world when lives are linked In addition to sports, Now TV last year continued to and business transformation is accelerating as never enhance its multi-platform offerings on the most current before, PCCW offers the combined capabilities of and comprehensive selection of movies and dramas, connectivity, entertainment and information technology. and enriched our video-on-demand program offering Our telecommunications arm, HKT, has built an in view of the continual transformation from linear extensive fiber network and operates the largest mobile channel viewing to on-demand usage. We also upgraded communications service in Hong Kong, while providing the Now Player app, the TV set-top box and its user superb global connectivity. Our media business offers interface for a better customer experience. Subscription dynamic viewing experiences at home and on-the-go – apps such as Now Soccer, HBO Go, and Fox+ were Now TV captivates audiences with the latest, exclusive launched to capture more viewership. content; and our international Viu OTT service constantly reaches new audiences with content tailored to local VIU STRENGTHENING OTT GLOBAL interests. As a leading IT business solutions provider in PENETRATION Hong Kong and mainland China, we support businesses As the leading video streaming service in Asia, PCCW’s across many industries to transform digitally. With international OTT media entertainment service was 24,000 employees from 50 nationalities working in present in 27 markets in Asia, the Middle East, India, more than 40 countries, PCCW is at the heart of digitally and Africa as of the end of 2017. The number of connected lives. monthly active users for Viu OTT jumped several times to 16.3 million at the year end, from 4.8 million I am pleased to report that in 2017 we aligned our a year ago. activities with the above goals. A review of the operations is presented in the following sections. To further differentiate itself from other operators, Viu OTT has embarked on content production jointly EXCITING PROGRAM LINEUP ON NOW TV with award winning directors and artistes in an initiative Now TV has once again demonstrated its commitment called Viu Original. We have produced content of to bringing to Hong Kong viewers top-rated international diversified genres such as drama, thriller, comedy, love sports events. In November, Now TV and the Group’s and romance, talk show and variety show. In 2017, free television service ViuTV jointly announced the a total of 24 titles composed of 293 episode of content exclusive rights to broadcast the 2018 FIFA World Cup in Chinese, Indian and Indonesian languages were Russia™ in Hong Kong. The World Cup is a welcome released. Viu has also brought in Mainland Chinese addition to Now TV’s lineup of large-scale international dramas and variety shows, and expanded its offerings to and local sporting events – Premier League, LaLiga, include Asian movies.