Talks between Netcom and PCCW have snagged after five months of intense bargaining. Both companies have widely different views about how much the business is worth, says the South China Morning Post.

Sources close to the talks said Netcom’s plan to buy a significant stake in PCCW could derail as the two telcos cannot agree on the valuation of the fixed-line network, and have yet to decide which telecommunications businesses should be included in the planned joint venture after exploring as many as 16 options.

It looks increasingly unlikely that the management at Netcom, whose main operating subsidiary is on track for a US$1.5 billion IPO next month, will continue to focus its attention on PCCW as listing preparations get into full swing, the newspaper says.

“I’m not sure if there is going to be a deal after all,” a well-informed source said. “(PCCW chairman) Richard Li (Tzar-kai) asks for a premium for the asset and Netcom wants to buy it at a discount.”

One person familiar with PCCW’s negotiation strategy indicated that the company could give up a majority stake if the price was right, but it seemed more likely to sell a minority stake in return for less cash but more advantageous terms on the mainland’s second largest fixed line operator.

(Shenzhen Daily September 7, 2004)