2ND LD: Pacific Century CyberWorks beats SingTel in HKT bid

Asian Economic News, March 6, 2000

HONG KONG, Feb. 29 Kyodo

(ADDING FINANCIAL TERMS OF OFFER)

Pacific Century CyberWorks Ltd. (PCCW) said Tuesday it has won the bid for Hong Kong's largest telecommunications operator, Cable & Wireless HKT Ltd. (HKT), defeating rival Singapore Telecommunications Ltd. (SingTel).

PCCW offered to acquire HKT shares by two methods -- either entirely through stocks or a cash and shares combination. The former option values HKT's entire issued capital at US$38.1 billion, the latter at US$35.9 billion, according to the financial terms of the offer.

Britain's Cable & Wireless PLC, which holds a 54% stake in HKT, has accepted the cash and shares combination, PCCW officials said.

Upon the deal's completion, PCCW and HKT will be merged into a new entity to be named Pacific Century CyberWorks-Hong Kong Telecom, which will have a market capitalization of more than $70 billion, PCCW Group Managing Director Alex Arena said.

PCCW will be the largest shareholder of the merged entity, Arena said.

Cable & Wireless will retain a stake of less than 20%, while other major shareholders, including Intel Corp. of the United States, China Telecom (Hong Kong) Group Ltd. and U.S. Internet business giant CMGI Inc., will hold between 2% and 5%, Arena said.

The deal is expected to take a few months to complete.

Under the all-stock alternative, HKT shareholders may obtain 1.10 new PCCW shares for each HKT share.

Or, shareholders may opt to get 0.7116 new PCCW shares and $0.929 in cash per HKT share under the combination offer that also allows shareholders to choose to receive an increased amount of cash instead of new PCCW shares.

In addition, HKT shareholders will be entitled to receive a second interim or final dividend of not more than HK$0.45 (US$0.058) per share for HKT shareholders in aggregate up to a maximum of US$700 million.

The deal is pending approval by HKT's board of directors.

PCCW Chairman Richard Li said the merger with HKT "strengthens PCCW's position as the leading broadband Internet company in Asia and complements our overall strategy."

But he said there are no immediate plans to cut HKT's staff or sell off any of its assets.

"We feel that the biggest asset of HKT is the people, is the talents inside and the management," Li told reporters.

He said HKT operates a comprehensive Hong Kong-based telecom network, which will serve as the best platform for PCCW to develop its businesses in Asia.

"Until today, we have no concrete consideration to sell off any telecom businesses. But it will be difficult to say in future," Li said.

In Singapore, SingTel said it has withdrawn from discussions with Cable & Wireless.

"We acknowledge the decision which has been made by the Cable & Wireless PLC regarding our offer," said Lee Hsien Yang, SingTel's chief executive officer.

Monday's decision by Cable & Wireless ends a monthlong fight between PCCW and SingTel for control of HKT.

SingTel announced Jan. 24 it was negotiating with Cable & Wireless for a possible merger with HKT. On Feb. 11, PCCW indicated its interest in joining the race.

SingTel's offer, however, drew concerns in Hong Kong that the Singapore government might meddle in Hong Kong affairs as the Singapore carrier is 76% owned by the city-state administration.

PCCW, the largest Internet company in Asia outside Japan, is the Hong Kong-listed technology flagship of the Pacific Century Group owned by Richard Li, son of business tycoon Li Kai-shing.

The company, set up only 10 months ago, has been aggressive in expanding its business in the region.

Its strategic partners include Japan's Internet and mobile phone giant Hikari Tsushin Inc. and CMGI.

Trading of PCCW shares was suspended on the Hong Kong market Friday, followed by a suspension of those of HKT on Monday. The companies are expected to resume trading Wednesday.