Communications

From left:
Eric Lo
Benjamin Tong
Vince Lam
May Fung
Ronald Chiu
Samuel Wong
Antony Law

The Wharf Communications group has, over the years, assembled a strong management and technical team to exploit technology opportunities in the areas of cable television, high speed Internet and telephony. Upon providing a useful currency for the communications business through the i-CABLE listing, this team has emerged as seasoned in managing a multimedia platform based on the broadband hybrid fibre coaxial (HFC) network within Hong Kong as the regional telecommunications hub. It is also on the frontier of global IT revolution that makes them alert to the dynamics and challenges of changing trends. In actively developing e-commerce and related contents, the Group through this management team effectively owns a unique experience and know-how that could not be matched by any of the existing and potential competitors in the market.

www.cabletv.com.hk

Hong Kong Cable Television Limited (HKC)

1999 saw the successful listing of i-CABLE Communications Limited ?a new holding company that encompasses the Group's telecommunications activities except New T&T - in the US and on the Hong Kong Stock Exchange. By attracting a broad base of institutional investors in North America, Europe, Asia and Hong Kong, the public floatation and its valuation provides a useful currency for this business unit. The asset base of the Wharf Group has de facto been substantially enlarged by the establishment of i-CABLE's enterprise value.

Subscription growth returned to double digit in terms of percentage during the year. Over 120,000 new subscribers were connected to our service with the SIF standing at over 450,000 at the end of 1999, which represented a 12 per cent growth over 1998. Net churn was controlled to be below 1.5 per cent per month. Independent surveys showed the HKC's daily viewership continued to rise last year for the fourth consecutive year. The number of HFC homes surpassed the number of MMDS homes during the last quarter of 1999. About 60 per cent of the 1.67 million homes covered by HKC's network are now fibre homes.

www.i-CABLE.com

Nine months after the launch of i-CABLE - a dial-up Internet access service, it has become one of the top five ISPs in Hong Kong, with over 160,000 registered users by the end of 1999. With an FTNS licence awarded by the Government in January this year, HKC launched a high speed broadband Internet access service based on cable modem technology at the end of the same month. Close to one million homes (in 4,000 buildings) in Hong Kong will be able to subscribe to cable modem service by the end of 2000. New content of the company's portal site will be introduced in stages during the first quarter of 2000.

Todate, all targets, whether operational, financial and developmental, have been achieved according to plans. The Group's objectives for 2000 are in the process of being progressively realised.

The Group is actively developing e-commerce and related contents, whether on B2B or B2C connections, in order to complement i-CABLE's multimedia capabilities and to take advantage of its technological synergy. Its joint venture with Commerce One and other leading Hong Kong corporations, should add substantial value to the Group.

NEW T&T

New T&T continued to be an innovative mover in the telecommunications industry with its building e-Connections vision. With the fall of the final monopoly in the telecom market, New T&T has built its own international gateway and has in effect become a full service provider.

www.newtt.com.hk

Reduction in the cost of goods, business growth of products and the right sizing of staff requirements have enabled the company to achieve positive EBITDA during the year. Earnings are expected to improve significantly in coming years with an accentuated fixed line business, thereby placing less reliance on IDD revenue. New T&T is in effect the fastest growing FTNS operator in Hong Kong.

The advent of ISR operations in Hong Kong on January 1, 1999 enables New T&T to bypass Hongkong Telecom's gateway and to directly connect to various international networks offering IDD 007 access to over 200 countries world-wide.

New T&T has launched new services during the year including ATM, broadband IP and multimedia conferencing. The company's move from a general spectrum of product and service offerings to more focused data and bandwidth applications continued with the successful IP Connect and IDA-P for carriers and PABX customers. Significant major accounts such as Merrill Lynch, CMG Asia and Winterthur Life Insurance show New T&T's capability to acquire and serve large new customers. New initiatives such as more IP-based services, public payphones and multi site hubbing are under planning to produce new revenue streams and to cut costs further.

In 1999, over 80,000 business lines were acquired while the carrier and wholesale business exceeded expectations. The commercial building access rollout program continued during the year and brought the total number of direct access commercial buildings to 198 and residential buildings to 76.

The Mobile Number Portability (MNP) mandated by OFTA was successfully launched in March by New T&T in conjunction with other operators.

www.col.com.hk

COL LIMITED

COL experienced a challenging year with many of our traditional customers reducing or postponing IT related expenditure due to the difficult economic situation experienced in the early part of the year and Y2K related concerns. Significant improvement was seen in the later part of the year, particularly in the areas of Data Centre Services and Financial Planning application software.

Despite the loss of a number of traditional clients during the year due to business and related systems downsizing, growth in the Data Centre Services backlog of contracted business was achieved during the year. Particular success was achieved in the areas of Business Recovery and Disaster Recovery services with a significant number of new name clients being secured during the later part of the year contributing to a backlog growth for these services in excess of 55 per cent. The facilities expansion program started in 1998 was continued in 1999 and is planned to accelerate in 2000 based on increased demand for these services.

Following a record year in 1998, business levels in this area experienced contraction in 1999. This was primarily due to lower than expected demand for Y2K related services, reduced customer staff outsourcing requirements, and a relatively low number of new project starts as customers facing Y2K concerns implemented software "change freezes" for a substantial part of the year. Despite the generally difficult environment, major contracts were secured for implementation of Financial Planning and e-commerce applications in the later part of the year.

Due to the relatively low levels of hardware sales achieved in 1998, hardware maintenance revenues in 1999 remained constant.

Continuing the trend observed in the later part of 1998, the hardware sales situation remained difficult throughout 1999. This situation can largely be attributed to major capital expenditure being deferred throughout the year and Y2K related change freezes implemented in the last quarter of the year.