HK Internet Up-star Wins Battle for HKT

Hong Kong's internet up-star Pacific Century CyberWorks Ltd. (PCCW) announced Tuesday it had reached an agreement with Cable and Wireless PLC to buy the territory's dominant telecoms operator Cable and Wireless HKT

Cyberworks, run by Hong Kong billionaire Li Ka-shing's son Richard Li, said in a statement that the terms of its offer for HKT had been agreed by HKT's British parent, Cable and Wireless PLC, which owns 54 percent of the HKT shares.

Under the terms of the offer, PCCW would pay 38.1 billion U.S. dollars in stock, or it also offers a cash-and-stock alternative that values Cable and Wireless HKT at 35.9 billion U.S. dollars.

The merged company, to be named Pacific Century CyberWorks HKT, will be worth about 70 billion U.S. dollars on the stock market. Cable and Wireless PLC will retain about 20 percent of the merged group. Other stakeholders with smaller shares will include China Telecom (Hong Kong) Ltd., CMGI Inc. and Intel Corp.

The merger with HKT will strengthen PCCW's position as the leading broadband internet company in Asia and complements the company's overall strategy, Richard Li, chairman of PCCW, said.

"HKT provides immediate customers for our talent, services, additional distribution platforms and accelerate PCCW's roll-out throughout Asia," the 33-year-old chairman said.

The deal announced Tuesday still needed approval by the board of Cable and Wireless HKT. If completed, the acquisition would be the biggest telecommunications merger in Asia and give a huge boost to PCCW.

It would also be a heavy blow to Singapore Telecom (Singtel), which first offered to purchase Cable and Wireless HKT in January this year and was hopeful to win a deal until Cyberworks joined the race on February 11. analysts said.

Singtel pull out of the running Tuesday morning, just one night after it announced it had joined hands with media giant Rupert Murdoch's News Corp to enhance its chances of buying Cable and Wireless HKT.

PCCW, founded nine months ago by Richard Li, is comprised of Pacific Convergence Corporation, Cyberworks Ventures and the Cyber-Port project and is mainly engaged in Internet-related investment.

As Hong Kong's biggest communications provider with a 97 percent market share, HKT markets a full array of quality voice and data telecommunications services backed by a state-of-the-art, fully digital, fiber-optic network and an extensive regional Internet backbone.

Analysts believed the marriage between PCCW and HKT would be beneficial to the telecoms development in Asia.

On the proposed merger, Chief Secretary for Administration of HKSAR Anson Chan said on Tuesday: "The government has no view on which party should or should not merger with Hong Kong Telecom."

The government's concern over telecommunication services is that "there should be a level playing field and fair competition" and "whoever holds the license should comply with the licensing conditions and all regulatory requirements," she said.

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