Tuesday, June 20, 2006

AOL / Time = PCCW / HK Telecom

Hong Kong phone operator PCCW said it is in talks to sell all of its core telecom and media assets for around US$5 billion. Apparently, the bid seems to be from Australia's Macquarie Bank. PCCW, headed by Richard Li, son of Asia's richest man Li Ka-shing, said it is evaluating the proposed deal which would involve only the assets and shares in the company's subsidiaries but not the main PCCW group, and has appointed Lehman Brothers to look at the terms. The sale could signal a significant change of the direction of Li who was hailed as visionary six years ago when he took over the Hong Kong telecom assets of Britain's venerable Cable and Wireless. The deal sent the share price soaring but then it all turned sour as the dotcom stock market bubble burst. PCCW shares, suspended on Monday, once traded as high as HK120 dollars but closed on Friday at HK4.80 dollars. The deal should piss off officials at the mainland's China Netcom, which paid one billion US dollars in January last year for a 20% stake in PCCW. China Netcom is China's second biggest fixed line operator.

The US had their AOL and Time, well Asia had its PCCW and Cable & Wireless (HK) - we all know which company in the end is really paying the bills. That's right, its Time and HK Telecom.

There are still many hurdles which would put a stop to the deal. The main one being Beijing's opposition to a foreign entity controlling the strategic telecom infrastructure of Hong Kong. Singapore Telecom was interested but Cable & Wireless opted to sell to Richard Li's Pacific Century Cyberworks (well, the mouthful grandoise company name doesn't mean much nowadays, that's why most would refer to it as PCCW). Was that to appease Beijing's concerns? If a foreign entity (macquarie Bank or Newbridge Capital) were to be "allowed" to control PCCW, it would still need the tacit approval from China Netcom.

Methinks, Richard Li is very tired, yes, he is only 39 with tons of bucks to boot... do you think he still wants to run a company dawdling at the edge of technology, an internet telecom/TV strategy that seems to go nowhere... He'd be thinking, "Flluuurck this, I'm so rich, I don't need to steer a big company that's going nowhere. Gotta get out while my reputation is not so tarnished yet."

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