CONTENTS 1 Corporate Profile 3 Statement from the Chairman 4 Statement from the Group Managing Director 8 PCCW in Numbers 10 Significant Events in 2019 12 Awards 18 Board of Directors 24 Corporate Governance Report 41 Management’s Discussion and Analysis 51 Financial Information 224 Investor Relations 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. Beyond connectivity, HKT provides innovative smart living and business services to individuals and enterprises. 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 24,700 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 2019 1 CORPORATE PROFILE (CONTINUED) HKT is Hong Kong’s leading operator in fixed line, broadband and mobile communication services. HKT is Hong Kong’s largest broadband service provider with its fiber network covering 88% of homes. CSL Mobile operates the csl and 1O1O mobile service brands. HKT also delivers end-to-end integrated Enterprise Solutions enabling companies to enhance operational efficiency and gain business insights. Its international operating division, PCCW Global, operates a Tier-1 global Internet backbone network with 125 points of presence across 76 cities and encompasses over 60 cable systems worldwide. HKT also provides a range of non-telecom services including mobile payment, travel and insurance. The Club is HKT’s loyalty program and an integral part of a new digital ecosystem connecting consumers and merchants. The share stapled units of the HKT Trust and HKT Limited are listed on the Stock Exchange of Hong Kong. PCCW Media Group operates the leading pay-TV service in Hong Kong under the Now TV brand, offering a wide range of local and international content through linear TV channels, on-demand and via OTT (over-the-top) apps. Now E is a subscription OTT service offering premium, exclusive dramas, movies and sports content to meet the needs of millennial viewers. PCCW Media also operates popular digital music streaming service MOOV in Hong Kong. PCCW Media Group also provides a pan-regional OTT video service under the Viu brand, offering premium content in local and regional languages and subtitles in different genres from top content providers, and Viu Original productions. Operated independently by HK Television Entertainment Company Limited, domestic free TV service ViuTV offers original format factual entertainment content, 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 company 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 solutions. PCCW Solutions offers an Infinitum solutions suite to support companies in various industries to revolutionize business operations and enhance customer experience. In addition, PCCW Solutions also provides digital marketing and consultancy services for its customers to drive marketing transformation. 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. With an office in Singapore as its Southeast Asian business development hub, PCCW Solutions is actively increasing its presence in the region. 2 PCCW annual report 2019 STATEMENT FROM THE CHAIRMAN I am pleased to report that PCCW recorded a stable Pacific Century Premium Developments’ overseas performance for the year ended December 31, 2019, projects continued to proceed according to plan. underpinned by HKT’s resilient operations and In Japan, the Park Hyatt Niseko Hanazano Hotel our ongoing regional expansion of the media and solutions opened for business to the public in January 2020. businesses. We achieved this set of results despite the With more than 90% of the Branded Residences economic setback in Hong Kong in the wake of the having been sold, PCPD will keep the last few remaining social unrest. units to be sold at a later date with the expectation that these units may achieve record setting prices in Niseko, Premium programming including world-class sports, before we proceed with our next phase development. movies and original productions remained the key consumer attractions for the Group’s multi-platform Hong Kong is technically in recession and is recovering media business last year. Now TV continued to from shocks including the social unrest and novel strengthen its market leadership in Hong Kong while coronavirus (COVID-19) outbreak. PCCW has a strong free TV service ViuTV entertained audience with business with a robust foundation in Hong Kong, engaging dramas and variety shows. Pan-regional and I am confident in our ability to continue to serve streaming service Viu OTT achieved more than Hong Kong people well and maintain our leading 41 million MAUs (monthly active users) in 17 markets market positions, as prosperity gradually returns to the by the end of 2019. city. At the same time, we will continue our strategy to cautiously pursue opportunities in the regional markets PCCW Solutions, our IT flagship business, delivered for additional sustainable growth going forward. encouraging results on its Southeast Asia expansion strategy last year. PCCW Solutions secured several significant contracts from Singapore government departments and large enterprises, and has a new Singapore office which now serves as the regional business hub. HKT once again demonstrated resilience of its operations in the retail and commercial segments amid a highly challenging local economic environment. Following the successful acquisition of a substantial amount of 5G mobile spectrum from government Richard Li auctions late last year, we have been working on Chairman the network rollout and target to launch 5G services February 13, 2020 in Hong Kong in April. PCCW annual report 2019 3 STATEMENT FROM THE GROUP MANAGING DIRECTOR Hong Kong’s economic environment deteriorated rapidly Now TV has acquired the exclusive Hong Kong in the second half of last year due to the social unrest. broadcast rights for the 2020 UEFA European Football Amid sluggish consumer market sentiment and cautious Championship (UEFA EURO 2020™), which will take spending by enterprises, PCCW recorded steady place in June and July. The kick-off time for most operational performances across its businesses. It is matches take place during Hong Kong’s evening my pleasure to present an overview of our activities in primetime hours, which will be favorable for the local media entertainment, IT solutions, telecommunications, audience. We expect this to positively drive subscription, and property development and investment in the sale of season passes, as well as advertising income. following sections. Pan-regional OTT entertainment service Viu operates in PREMIUM AND CREATIVE CONTENT FOR 17 markets including Southeast Asia, the Middle East VIEWERS and South Africa. It continued to record a significant Our media business strategy is to provide premium increase in MAUs (monthly active users), to 41 million Asian and international content in sports, movies, as of the end of 2019, from 31 million a year ago. dramas and lifestyle through an omni-channel Total video views for the full year also jumped 69% to approach, while also providing exceptional customer 5.7 billion, when compared to 2018. experience, to meet the diverse viewing habits among audience segments across Hong Kong, Southeast Asia, The growth was attributable to Viu’s focus on content and the Middle East. such as popular Asian content and other locally relevant programming, as well as original content creation Local pay-TV service Now TV reported stable installed under Viu Original, which has gained traction across base and ARPU (average revenue per user) in 2019, Southeast Asia, particularly in faster growth markets despite dampened consumer sentiment. In addition to including Thailand and Indonesia. Viu will continue to world-class sports content, Now TV also offers the latest create content assets through developing original IPs and most critically acclaimed Hollywood and Asian (intellectual properties), adapting globally acclaimed IPs, blockbuster movies and TV shows. In 2019, 90% of the and utilizing innovative production concepts. top 50 worldwide highest grossing box office receipt movies and numerous award-winning TV shows were In 2019, free TV service ViuTV recorded satisfactory available on Now TV. Through the Now Player and growth, underpinned by a strong lineup of drama shows Now E OTT extensions, we are also able to bring the best as one of its core propositions.