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Press Release
19 Mar 2002
Consistent Growth Delivers Net Profit for Wharf New T&T
Wharf New T&T, the fastest-growing fixed telecommunications network services (FTNS) operator in Hong Kong, today announced its first net profit in the 2001 financial year. That makes it the first new FTNS operator to report a net profit since the market was deregulated in 1995.


Financial Highlights


Although the general business environment was unfavourable during most of 2001, with business closures and downsizing prevalent, Wharf New T&T's achievements during the year included:

- Installed base of fixed lines grew by close to 70% to 240,000 and tripled in the past 24 months

- 6% market share overall and 11% in the business sector in fixed lines

- Network coverage reaches 90% of customers on Hong Kong Island and 50% in Kowloon, Tsuen Wan and Kwai Chung

- IDD volume exceeded 320 million minutes, doubling in the past 24 months

- IDD market share close to 10%

- Net revenue grew by 34% to $1,088 million, whereof 65% from fixed lines

- Gross profit margin improved to 55%

- EBITDA doubled to $227 million, representing a sound margin of 21%

- A net profit of $8 million was achieved to break into profitability

Continuous Business Transformation

Wharf New T&T has been strategically transforming from low-value IDD to high-value fixed-line services. Today, revenue contribution from its fixed-line business represents 65% of the total net revenue, up from a mere 27% two years ago. Revenue from fixed lines increased by 75% in 2001 which helped to improve its overall gross profit margin by 55% from 46% two years ago. This strong growth is attributable to its clear strategic focus on targeting the market for business fixed lines, particularly high-value backhaul, International Private Leased Circuit (IPLC), data and broadband services.

Reflecting its important role in the local telecommunications market, Wharf New T&T now carries 35% of the total dial-up Internet traffic and hosts 55% of all active External Telecommunications Services (ETS) operators in Hong Kong. Moreover, the Company was also able to capture more than its fair share in the provision of high bandwidth backhaul and IPLCs, particularly to the Mainland.

During the year, the Company continued to penetrate the market with high-value voice and data lines. The agreements with Hong Kong Exchanges and Clearing Limited and the Securities and Futures Commission of Hong Kong to provide network infrastructure for CCASS/3 and FinNet respectively clearly demonstrated Wharf New T&T's capabilities in competing against some very tough players in their strongholds.

After aggressively rolling out network in the past few years, the Company is now able to provide fixed lines to 90% of the customers on Hong Kong Island and close to half of those in Kowloon, Tsuen Wan and Kwai Chung. Rollout will accelerate this year and next year to the remaining parts of Hong Kong.

Commenting on the results, Mr. Stephen Ng, Chairman & CEO of Wharf New T&T said "We are very pleased with our performance. We have seen continued strong growth in our fixed line business, which successfully transformed Wharf New T&T from a low-value IDD operator to a full-fledged fixed-line operator. By targeting the high value customers and high value products, and being more efficient than the competition, we were able to achieve profitability with a 6% market share. We will now capitalise on our hard-earned market position to gain bigger market share and greater profitability."

"This was particularly gratifying because it was achieved amidst dramatic upheavals in the telecommunications industry. Around the world, the telecom sector turned from being the darling of investors into their outcast overnight. There are many who still question how many of the new operators that sprang up in this sector's haydays in the past few years can survive. Wharf New T&T has proven the Early Mover Advantage for an operator with a well thought out and executed plan," Mr. Ng added.

Outlook

Wharf New T&T's latest business achievements further demonstrate that it is in a strong position to compete in the new arena when the telecom market is fully liberalised in 2003.

"Being the first new FTNS operator to break into profitability marks another milestone for Wharf New T&T and reinforces our position as a significant new force in the telecom industry. It also demonstrates that Wharf New T&T is a serious challenger to the incumbent operator. Over the past years, we have invested strategically to build up a significant head start over the competition to challenge the former monopoly. The investment has begun to pay off and we will take full advantage of that. We expect our high growth to continue into and extend beyond 2002," predicted Mr. Ng.

Wharf New T&T has established a solid foundation for its future with a profitable business model and has developed a diverse income base through the launch of new products and services. Wharf New T&T is well positioned to meet the competition in today's environment as well as for the future. In the coming years, Wharf New T&T will continue to sharpen its overall competitive edges to take on future challenges and opportunities.
About Wharf New T&T

Wharf New T&T, licensed in 1995, is the fastest growing network operator after the opening of Hong Kong's fixed telecommunication market. Since its launch, the Company has continually sought to upgrade its services and deliver competitive products at competitive prices to Hong Kong businesses and consumers.

Wharf New T&T is a member of The Wharf Group of companies, one of the largest groups of companies in Hong Kong. The Group also owns i-CABLE Communications Limited, the No. 1 Television Station in Hong Kong for News, Movies and Sports, as well as a leading Internet access service provider.

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