PCCW says alliance talks with Telstra in final stage

Asian Economic News, Oct 2, 2000

HONG KONG, Sept. 28 Kyodo

Hong Kong-based Internet giant Pacific Century CyberWorks Ltd. (PCCW) said Thursday negotiations on its proposed strategic alliance with Australian telecommunications firm Telstra Corp. have entered the final stage.

PCCW Chairman Richard Li, however, declined to reveal any details of the talks, saying he is restricted by the listing rules in Hong Kong.

The proposed partnership between the two companies was reported to be under threat, as Australian media said Telstra wants PCCW to agree to a lower price for the deal following a recent fall in PCCW's share price.

PCCW and Telstra signed a memorandum of understanding in April, agreeing to jointly form an Internet infrastructure company and a regional mobile communications company.

Under the arrangements, PCCW will issue a $1.5 billion in convertible notes to Telstra, while the Australian telecom company will contribute about $1.5 billion cash and assets for its 40% stake in the proposed regional mobile firm.

U.S.-based credit rating agency Standard & Poor's on Thursday also raised questions over the risks for Telstra involved in the alliance with PCCW as it downgraded Telstra's long- and short-term credit ratings to A/A1 from AA/A1, with a stable outlook.

Meanwhile, PCCW reported Thursday a net loss of HK$34.94 million (about US$4.49 million) in the first six months of this year, down from the HK$40.71 million loss a year earlier.

The first-half loss, posted before PCCW's merger with Cable & Wireless HKT Ltd. (HKT) in August, was largely due to a HK$222 million amortization charge related to its purchase of HKT, the largest and oldest telecommunications company in Hong Kong.

The acquisition of HKT was the largest-ever corporate takeover in Asia, including Japan.

PCCW's first-half turnover was HK$104 million.