PCCW confirmed on
Thursday that China Network
Communications Group Corporation (China Netcom Group) will buy
20 percent of its shares for US$1 billion in cash.
"It will be the largest investment ever made by a mainland
State-owned enterprise in a Hong Kong telecoms company," said Jack
So, deputy chairman and group managing director of PCCW.
PCCW is controlled by Richard Li, the son of Asia's richest man,
Li Ka-shing. He will see his stake shrink to about 25.5 percent
from 31 percent after the acquisition. But he will remain the
chairman and largest shareholder.
"This transaction will lay the foundations for PCCW to
participate in the fast growing telecommunications market in China.
At the same time, the capital injection will further strengthen our
financial fundamentals," said Li in a statement.
China Netcom Group, the parent of Hong Kong and New York-listed
China Netcom, is expected to buy 1.34 billion new shares in PCCW
for HK$5.9 apiece (75 US cents), a 25.5 percent premium on
Wednesday's closing price of HK$4.7 (60 US cents).
Shares in PCCW were suspended ahead of the market opening in
Hong Kong yesterday at their own request. Till then, there had been
a 5 percent reduction in the share price over the last three
months, and a 15 percent decline in the past year.
Alexander Arena, chief financial officer of PCCW, said proceeds
from the acquisition will partly go to reducing the company's debt
from US$3.8 billion to US$2.8 billion, and the transaction is
expected to be completed in late March subject to shareholders'
approval.
In addition, PCCW agreed to earmark over 60 percent of the
proceeds, or HK$5 billion (US$641.03 million) for inland-related
investments and set up a PRC Business Development Committee.
PCCW is a prominent player in HK's fixed-line networks,
broadband TV and property development. Its broadband service has
more than 400,000 subscribers and is currently operating more than
40 channels.
Norman Zhang, telecoms analyst of Tai Fook securities research,
said this was good news for all involved, adding that China Netcom
might focus more on PCCW's broadband services in the future.
He added that the development of broadband services on the
mainland remains in its infancy compared with rest of the world, so
this could be a new growth area for China Netcom.
(China Daily January 21, 2005)