CyberWorks unveils new Net Services strategy

Pacific Century CyberWorks has unveiled a new Internet Services strategy that will focus on broadband as a key source of growth for the company.

SINGAPORE--Pacific Century CyberWorks, which last August took over Cable & Wireless HKT, has unveiled a new Internet Services strategy that will focus on broadband as a key source of growth for the company.

"At the same time the company expects to reduce costs through consolidation of related business activities," it noted in a statement this evening.

Apart from the 340 job cuts announced in the Internet Services unit this morning, CyberWorks said it will be integrating its Network of the World (NOW) services for PC users and television subscribers, and introducing a subscription-based version of its NOW content under a Web site called www.now.com.hk.

Gone, too, are its ambitions for a global audience, with focus now on the Hong Kong market.

The Hong Kong-based company will be revising the business model of its interactive television service iTV with lower unit costs for content and new revenue sharing partnerships, and maintaining the email and Internet access services of its consumer portal, Netvigator.

Content for iTV would be delivered over broadband using CyberWorks' proprietary set top boxes, and provide a platform for future customer migration to new platforms and more value-added services, the statement said.

CyberWorks claims to have the highest number of broadband subscribers in Hong Kong, and is targeting both broadband and iTV subscriptions to more than double from 230,000 at the end of 2000 to more than 500,000 in 2003.

Capping investments, expansion
Before buying over C&W HKT last year, Li said he would spend US$1.5 billion over five years to develop content for NOW.

However, the high costs of Internet expansion and write-downs in its online investments have been blamed for CyberWorks' full-year loss of US$886 million (or US$1.9 billion in US accounting terms). And with US$5 billion in debt, CyberWorks chairman and CEO Richard Li is under even greater pressure to cut costs and focus on the bottomline.

The company will now be capping its investment in the Internet Services unit at about US$190 million (in terms of earnings before interest, tax, depreciation and amortization, or EBITDA) this year, less than the US$200 million previously committed to; and to a maximum of US$100 million for the next two years.

Regional broadband deployment would be allowed "only after the success of these initiatives in Hong Kong has been proven. Beyond Hong Kong, the company's strategy will be designed to use scale and traditional advertising revenues to amortize content costs," the statement added.

According to Reuters, CyberWorks expects its Internet services to breakeven on a cash flow basis by December 2003, or spin off its Internet operations in a separate listing by then.

"It's saying all the right things, but you've got to give people a little more to go on," one analyst told the newswire, adding that he wanted to hear more about revised content offerings, pricing, and partnerships with content providers.

CyberWorks' shares, which is down 52 percent this year, traded to as high as HK$28.50 early last year before the company's debt burden and eroding market sentiment on Internet stocks took its toll.

More job cuts expected
Wednesday's job cuts, which represents about 40 percent of CyberWorks' 840 Internet-related workforce, are expected to save the company US$16 million a year, Reuters said.

Most of the 290 sacked yesterday, according to the online edition of the South China Morning Post, were Netvigator editorial staff.

The online report added that while Li would not say if more layoffs were on the cards, the CyberWorks' Employees' General Union chairman Cheng Chun-man said: "We believe it is withholding a lot of information from us and we expect more lay-off announcements."

Separately, credit rating agencies Moody's and Standard & Poor's assigned CyberWorks' core telecoms business with investment-grade credit ratings and a stable outlook.

The reorganization is subject to the appropriate regulatory and other approvals.

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