Now TV Achieves Profitability In FY09

Now TV, the IPTV platform run by dominant Hong Kong telco PCCW (0008.HK), reported a HK$4 mil./US$0.5 mil. profit at the EBITDA level for the year to end-2009, after six years since its launch.

However, this did little to mask an erosion in PCCW's core revenue, which fell 5% Y/Y to HK$20.9 bil., as revenues from its Telecommunication Services (TSS) unit dropped 7% to HK$16.3 bil. largely attributed to a shrinkage in business customers.

The pay-TV platform, reported in the telco’s P&L under its TV & Content business, was its only growth segment, managing to reverse an EBITDA loss of HK$34 mil. in 1H09 to record a profit of HK$38 mil. in 2H. The segment’s revenue rose 5% Y/Y to HK$2.35 mil., buoyed by subscription revenue growth, which surged 11% on the bank of expanding subs base and ARPU.

PCCW reported that Now TV’s installed STB base increased 5% Y/Y to reach 1,001,000 subs at end-2009, while ARPU improved to HK$174 vs. HK$171 in 2008. Total pay subs reached 813,000, according to MPA estimates. 

Eye 2, its wireless, touch-screen multimedia device that enables voice and video calls as well as a secondary connection to Now TV, has helped boosted earnings and subscriptions. Ad sales meanwhile, slipped 11% as a difficult economic climate in 2009 took its toll.

Moving forward, Now TV hopes to build on this milestone, with content costs (~90% of revenues, according to MPA) coming down after it offloads EPL football rights in August (i-Cable secured EPL rights for 2010-2013). It will now focus on growing ARPU and deliver a broad range of content, including sports such as football, tennis, golf, as well as its library of local programming. In addition, it pledged to submit its application for a FTA television license “very shortly”.

Broadband still growing
One bright spot in the company's core telco business was the contined growth of broadband. PCCW added 20,000 broadband subscriptions during the year to reach 1.146 mil. at end-2009.

Its broadband business is well positioned going forward; the launch of VDSL2 services in 2009 now delivers variable connection speeds of 30Mbps, 50Mbps and 100Mbps, bridging the gap between its ADSL/ADSL2+ (1.5-18Mbps) and fiber services (1,000Mbps).

CapEx for FY09 stood at HK$1.7 bil., down from HK$3.3 bil. in 2008, with major areas of investment going towards its quad-play proposition, as well as high-speed broadband.

Now TV P&L
		2007	2008	2009
Sales	(HK$ mil.)	1,703	2,239	2,350
EBITDA	(HK$ mil.)	-157	-83	4
Source: Company data