Billionaire Richard Li (李澤楷) may seek to spin off PCCW Ltd’s (電訊盈科) telecommunications assets, at least his sixth attempt to reorganize Hong Kong’s biggest phone company after it underperformed rivals.
PCCW rose 4.6 percent as of the noon trading break in Hong Kong yesterday, headed for the stock’s biggest two-day gain since January last year, after the company said it’s in talks with regulators in Hong Kong to list the assets separately as a business trust.
Li’s plan follows a failed attempt to take PCCW private in 2009, when a Hong Kong court ruled that a shareholder vote was manipulated.
PCCW, with businesses including property development and television, fell 4.7 percent in Hong Kong trading from the start of the year to last week’s close, while shares of SmarTone Telecommunications Holdings Ltd (澳門數碼通) jumped 77 percent and Hutchison Telecommunications Hong Kong Holdings Ltd (和記電訊香港控股) gained 11 percent during the same period.
“The capital that’ll be raised from the spinoff will help them develop new businesses,” said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. “Borrowing costs are now rising, so it may be a good moment for the company to reduce its debt.”
Telecommunications businesses, including fixed-line, Internet, mobile-phone, pay-television and computing services, accounted for more than 90 percent of PCCW’s first-half revenue of HK$11.8 billion (US$1.5 billion), with the rest coming from property. Spokeswoman Anita Choi declined to comment on which of the company’s assets would be included in the proposed spinoff.
Li Ka-shing (李嘉誠), Hong Kong’s richest man and the PCCW chairman’s father, spun off some container-terminal operations from Hutchison Whampoa Ltd (和記黃埔) earlier this month. The newly formed investment trust, Hutchison Port Holdings Trust (和記港口控股信托), fell 5.9 percent on its first day of trading in Singapore on Friday.
PCCW has lost more than 90 percent of its value since the younger Li in 2000 used his Internet start-up Pacific Century Cyberworks Ltd to take over Cable & Wireless HKT, the former phone monopoly in Hong Kong, to create a company valued at about US$41 billion in the biggest merger between two Asian firms at the time. PCCW has a market value of HK$24.9 billion.
Li, 44, was unable to sell his controlling holding in PCCW to former Citigroup Inc banker Francis Leung (梁伯韜) in 2006 after failing to secure minority shareholder approval.
That followed unsuccessful bids to sell PCCW’s main telecommunications assets to TPG Inc and Macquarie Group Ltd in the same year.
In October 2008, PCCW scrapped the proposed sale of as much as 45 percent of its HKT Group Holdings Ltd (HKT集團控股) unit, owner of the company’s main telecommunications and pay-television businesses, citing a lack of attractive offers during the global financial crisis.
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