PCCW Announces Internet Job Cuts

by Mary Swire, Tax-News.com, Hong Kong

04 July 2001

After Hong Kong telecommunications giant PCCW (Pacific Century Cyberworks) announced a loss yesterday for 2000 under US accounting rules of HK$14.57bn (US$1.9bn), it pleased markets in the Far East this morning by also announcing 340 layoffs in its Internet services unit, causing its stock to surge by as much as 8.89 percent in early trade to HK$2.45. The company will present detailed plans for its Internet unit at a press conference later today.

The company is obliged to report under US rules because of ADRs issued by Hong Kong Telephone, which it acquired from Cable and Wireless last year. The comparable figure under Hong Kong rules was less than half as much (HK$6.9bn), because in Hong Kong goodwill can be written off directly against reserves, while in the US it has to be amortised against trading profits. The amortisation charge for 2000 was HK$4.05bn. However, the US figures also included a goodwill impairment charge of HK$4.36bn, indicating that the price PCCW paid for HKT was too high in relation to current values. When PCCW announced its 2000 results in Hong Kong this year it wrote off US$22bn in goodwill against shareholders' funds.

The Hang Seng Index (HSI) was down 0.43 percent, or 56.52 points, at 13,128.23 at 11.01 a.m. (0301 GMT). PCCW was the market's most active stock, with HK$201m of trades. Prior to the start of trade, PCCW's stock had lost 85% in the past year and 13% in the past month.

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