Hong Kong Technology Venture Company Limited · HKEX:1137
Hong Kong Technology Venture — City Telecom (H.K.) — Credit Suisse 2011 Global Communications and Media Convergence Conference
34 slides from Hong Kong Technology Venture's conference presentation, Mar 7, 2011
Slide 1: Fibre Wonderland: Network for Our Next Generation
City Telecom (H.K.) Limited Fibre Wonderland: Network for Our Next Generation (HKEX:1137.HK / NASDAQ: CTEL) NiQ Lai, CFO and Head of Talent Engagement Credit Suisse 2011 Global Communications and Zoie Media Convergence Conference Poon Miami, Florida 07 March 2011 Wong Hei Lam 1
Slide 2: What we offer for US$26/month
What we offer for US$26/month 2
Slide 3: Disclaimer
Disclaimer This presentation contains forward-looking statements and information that involve risks, uncertainties and assumptions. Forward-looking statements are all statements that concern plans, objectives, goals, strategies, future events or performance and underlying assumptions and other state
Slide 4: Agenda
Agenda • Company Overview • Financial Review • CTO Supplement 4
Slide 5: About City Telecom Group
About City Telecom Group • Co-founded by cousins Ricky & Paul with 10 Talents and start-up capital of less than HK$1 million • 1st company to shatter the International Direct Dial (IDD) 1992 monopoly in Hong Kong • Over 3,000 Talents located in Hong Kong and Guangzhou with HK$1.5 billion annual reve
Slide 6: What we are Passionate About
What we are Passionate About Core Value “To experience the emotion of competition, winning and crushing competition” Big Hairy Audacious Goal (BHAG) “Be the largest IP provider in Hong Kong by 2016” Vivid Description “My children will say, “Dad I love you as my Father” 6
Slide 7: Fibre-To-The-Home Global References
Fibre-To-The-Home Global References Verizon FiOS in the US FTTH’s success in Japan For year to Dec 31, 2009, 56.5% growth in In Japan, FTTH overtook copper-based FiOS revenue to US$5.5 billion, with 3.4 xDSL in 2008 million subscribers on 15.4 million homes pass FTTH posted compound annual growth ra
Slide 8: Hong Kong's Extreme Density
Hong Kong’s Extreme Density Hong Kong is one of the most densely GDP/ populated cities on Earth Capita Pop Area Density Country (2009, U$) (million) (mi2) (mi2) Extremely compelling “Addressable Income per Fibre Mile” HK 29,559 7 428 16,355 US$200 cost per home passed US 46,443 307 3,717,813 83 comp
Slide 9: Asia's Best Fixed-Line and Broadband Carrier
Asia’s Best Fixed-Line and Broadband Carrier 9
Slide 10: Our Culture
Our Culture 3,000-Talent Town-Hall Meetings, Nov 2009 10
Slide 11: Talent Development: CXO of the Future
Talent Development: CXO of the Future Management Trainee Program to Develop our future CEO, CFO, CTO etc in 15-20 years time. Requires - CFA Level 1, half marathon, 18 management books, etc. 1,300 applicants for two positions in 2011. 11
Slide 12: Our Talents – "Private Bank" Service
Our Talents – “Private Bank” Service “Private Bank” Style Account Manager Each of our new customers are assigned to a private account manager, offering Private Banking level of personalized service Ad placed in prominent local newspapers, Oct 2010 12
Slide 13: Disruptive Changes to Industry Structure
Disruptive Changes to Industry Structure Two Year Price Charts up to 12 November 2010 Netflix (NFLX) Netflix (NFLX) Blockbuster (BLOAQ.PK) Comcast (CCS) City Telecom Amazon (AMZN) (CTEL) Barnes & Noble (BKS) PCCW (0008.HK) 13
Slide 14: FTV over HKBN's Fibre
FTV over HKBN’s Fibre • Leverage HKBN’s existing 2.0 mn Fibre homes pass by 2011. • All TVs with digital turner in HKBN Fibre Buildings will be able to access CTI FTV service without need for set-top-box. • Structurally superior cost to legacy PTV and far greater capacity than legacy over-the-air FT
Slide 15: Agenda
Agenda • Company Overview • Financial Review • Management Outlook 15
Slide 16: Company Vision Statement
Company Vision Statement Big, Hairy & Audacious Goal (BHAG) Set in November 2006 “To be the largest IP provider in Hong Kong by 2016” Management compensation is based on BHAG Key Performance Indicators 16
Slide 17: Exciting Market Potential
Exciting Market Potential Revenue Potential PCCW FY09: US$2,405 million City Telecom FY09: US$190 million Note: PCCW Revenue = Fixed Telecom Services (TSS) + Now TV only 17
Slide 18: Five Year Trend
Five Year Trend 12 Months Ended Aug 31 FY06 FY07 FY08 FY09 FY10 FTNS Subscriptions ('000) Broadband 220 247 316 391 526 Voice 281 308 329 382 431 Digital T V 116 128 156 170 153 Total 617 683 801 943 1,110 Broadband Bundle Blended ARPU (HK$/month) (Note 1) 148 175 191 182 135 IDD Minutes (mn) 788 65
Slide 19: FY11 Guidance
FY11 Guidance Focus on profitability with EBITDA to exceed HK$580 mn From 526,000 subscriptions as of 31 August 2010 to exceed 600,000 subscriptions by 31 August 2011 Capital expenditure of HK$320 mn to HK$350 mn ARPU Vs EBITDA FY11 Financial Year End FY05 FY06 FY07 FY08 FY09 FY10 Guidance Subscribe
Slide 20: Incredible Value at US$26/month
Incredible Value at US$26/month 20
Slide 21: Capex: Lower Cost & Much Higher Performance
Capex: Lower Cost & Much Higher Performance NGN Scales Logarithmically xDSL Does Not Scale Well Vs Cisco Catalyst 2960 Router with 24 xDSL subscriber ports Estimated cost ~US$200/port List Price: US$1,295 or US$54/port 21 Source: CTEL estimates
Slide 22: Opex: 48% of Talents Based in Low Cost Guangzhou
Opex: 48% of Talents Based in Low Cost Guangzhou Customer Acquisition – Customer Retention – Hong Kong (1,633 Talents^) Guangzhou (1,520 Talents^) 14 Fibre Shops Customer service prioritized Numerous “on-the-street” marketing kiosks Individual client teams 400 sales representatives Proactive up-sell
Slide 23: Rapid Broadband Market Share Gains
Rapid Broadband Market Share Gains Broadband Subscribers (‘000) Net Additions (‘000) PCCW 1400 (31Dec YE) 80 Launch of bb100 @ City Telecom HK$99/month 1200 (31 Aug YE) 60 i-Cable (31 Dec YE) 1000 Hutchison Telecom (31 Dec YE) 40 800 600 20 400 0 1H 07 2H 07 1H 08 2H 08 1H 09 2H 09 1H 10 2H 10 200 (
Slide 24: Competitor Analysis
Competitor Analysis Incumbent PCCW enjoys EBITDA great margins, 43% on core telecom business, versus 30% for City Telecom, i.e. we would be happy to met half way. Hutchison Telecom is market leader in mobile via “3” and clear #2 in corporate fixed line, which combined forms the bulk of its business.
Slide 25: Agenda
Agenda • Company Overview • Financial Review • Technology Supplement 25
Slide 26: Evolution of Broadband Access Technology
Evolution of Broadband Access Technology Home Fibre-To-The-Home 1Gbps CAT5e HKBN 100Mbps Baseline $ 100Mbps (G.Vector) LTE Strong Weak MIMO 2x2 Fibre-To-The-Building (VDSL2) $ 40Mbps Signal Strength 15Mhz 27Mbps (ADSL2+) per sector Fiber $ 25Mbps Fiber to 2006 HSPA+ FTTC the curb (ADSL2) 64QAM 6bits
Slide 27: The Real Need for 100Mbps
The Real Need for 100Mbps Devices Content Multi-User and Tasking Full Resolution 3D 24Mbps Dad /Mom Son Daughter Half Resolution 3D And HD 9Mbps 100/1000 P2P Streaming 2Mbps Mbps 802.11n and HomePlug AV2 YouTube HD download >100Mbps HD->3D HD 8Mbps HD 8Mbps 10-25Mbps + P2P@3Mbps + P2P@3Mbps PinP 4x1
Slide 28: Appendix
• Appendix 28
Slide 29: Consolidated Income Statement
Consolidated Income Statement HK$ mn FY09 FY10 YoY % FTNS turnover grew by 10.2% to Fixed Telecoms Network Services 1,230.9 1,356.1 10.2% HK$1,356.1 mn, representing 86.1% International Telecoms Turnover 247.3 1,478.2 218.6 1,574.7 -11.6% 6.5% of total turnover Interest income Other income, excludin
Slide 30: Consolidated Balance Sheet
Consolidated Balance Sheet HK$ mn 31-Aug-09 31-Aug-10 During FY2010, we brought back and Goodwill 1.1 1.1 fully redeemed our 10-year senior Fixed assets 1,302.4 1,431.8 Long term prepayment 6.0 5.1 notes Long-term portion - deferred expenditure 12.8 6.6 Cash and bank balances 226.5 588.7 Restricted
Slide 31: ARPU Trend - Recovery in FY2011
ARPU Trend - Recovery in FY2011 Broadband Bundles - ARPU HK$/month During FY2010, despite competitors matching our price cuts, we dominated the market with 135,000 200 191 196 net additions versus estimated total 177 182 market 145,000 net additions (Per 175 175 ofta.gov.hk statistics of 2.093 mn as
Slide 32: Please Try This At Home
Please Try This At Home Select 1080p HD option Avatar 1080p FULL HD Movie Trailer http://www.youtube.com/watch?v=_i2RCBa3l-g 32
Slide 33: www.youtube.com/my_speed
www.youtube.com/my_speed At 26Mbps, HKBN is >7x higher than Global Average 33
Slide 34: END – Investor Engagement Contact
::: END ::: Investor Engagement Contact Mr. NiQ Lai CFO and Head of Talent Engagement Telephone: +852 3145 6068 Email: investor_engagement@ctihk.com “Fibre Wonderland”: Network for Our Next Generation In “Alice in Wonderland”, the 1865 novel by Lewis Carroll, Alice falls down a rabbit hole and enter