[Caihua Social News] PCCW (00008-HK) announced a proposal to transfer PCCW Media, a Now TV business operator, to HKT Trust and HKT (06823-HK) at a cost of US $250 million (about HK $1.95 billion). In addition, the company has also conducted a strategic review of PCCW OTT. PCCW OTT operates pan-regional OTT (over-the-top) video entertainment and music platforms, including "Viu" and "Moov" brands, in Hong Kong, Southeast Asia and the Middle East. The company will continue to actively evaluate strategic options to support the continued growth of PCCW OTT, including seeking to further introduce third-party financing to PCCW OTT through a potential independent listing of PCCW OTT or additional investment in PCCW OTT through strategic partners.
Now TV's first-half revenue fell 6 per cent to 1.27 billion yuan, while earnings before interest, tax, depreciation and amortisation (EBITDA) fell 3 per cent to about 200m yuan, affected by the suspension of global sporting events. During the period, OTT business revenue rose 14 per cent to Rmb500m, while losses before interest, tax, depreciation and amortisation narrowed 66 per cent to Rmb81 million.
The company pointed out that the transaction will help strengthen and maximize the prospects of PCCW's media business and enhance synergies, and the proceeds will be used for general corporate and working capital purposes, including debt repayment.
The directors are of the view that the proposed transaction will help to strengthen and maximize the prospects of PCCW's media business, enhance synergies and bring the following benefits: (1) to create the only real "four-in-one" service provider in Hong Kong-HKT Trust and HKT to acquire the "Now TV" business of Hong Kong's leading pay TV service provider operated by PCCW Media. Upon completion of the transaction, HKT Trust and HKT will become the only true "four-in-one" service provider in Hong Kong, providing a seamless user experience through fixed network, broadband, mobile communications and pay TV services. (2) strengthen the product line-"Now TV" will work more closely with HKT Trust and HKT's broadband and mobile communications business, and provide a richer full range of connected services and program content to better meet customer needs and preferences. (3) strengthening the cross-selling of services-as the cross-selling of broadband, mobile communications and pay TV services through common channels will be strengthened in the HKT Trust and HKT Group after the expansion of the proposed transaction, it is expected to increase the conversion rate and customer satisfaction, and strengthen customer retention. (4) improve operational efficiency-after the completion of the proposed transaction, the functions of the network, sales team and several enterprises will be integrated, which is expected to produce business synergies and improve operational efficiency, thereby enhancing customer experience and business productivity. (5) as the company is the controlling shareholder of HKT Trust and HKT, the company will continue to hold an indirect interest in PCCW Media after the completion of the proposed transaction, and benefit from any potential growth in PCCW's media business by integrating into the financial results of PCCW Media Group. And PCCW Media Group's financial position is expected to be strengthened over time as a result of the synergies generated by the proposed exchange, thereby improving the company's overall financial position.