Hong Kong Internet star, Pacific Century CyberWorks, crashing to earth
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HONG KONG, Oct 19, 2000 (The Canadian Press via COMTEX) -- High-flying Pacific
Century CyberWorks Ltd. looked like a sure winner to lots of investors when it
agreed to buy Hong Kong's top telecom company, Cable & Wireless HKT, last
spring. But the bold $38-billion US merger, aimed at using phone revenues to
finance Internet ventures across Asia, has come down to earth.
CyberWorks' stock price is tanking - and analysts say the company's recipe for
joining an Internet start-up with a traditional telecom firm appears seriously
flawed.
The comedown of one of Asia's biggest mergers ever is a stunning blow to tycoon
Richard Li, scion of Hong Kong's most prominent business family, who started
CyberWorks just last year. It also underscores the harsh new investment reality
facing high-tech start-ups.
CyberWorks' stock price has tumbled to less than one-fourth of its levels early
this year, when it was bidding for Cable & Wireless HKT. CyberWorks lost 1.6 per
cent more Thursday, closing at about 80 cents. The shares have dropped every day
this week despite a recent agreement that lets CyberWorks slash its debt by $3.5
billion.
The turnaround was dramatic.
When CyberWorks closed its deal to buy Cable & Wireless last August, Li said he
expected a doubling in value of his company, with Internet interests throughout
Asia ranging from high-speed Net services for businesses to hosting Web pages to
a venture capital arm.
A key offering is Network of the World, a service that lets customers view
English-language TV newsclips over high-speed Internet lines. The company plans
to expand into Chinese with a studio built in mainland China, Japanese content
from a studio to be built in Japan and Hindi content from a studio to be built
in India.
Analysts now say the company's strategy for its collection of Internet
businesses is unfocused and too ambitious. They worry about debt that CyberWorks
took on in buying Cable & Wireless HKT.
Many believe the phone company's former parent, Cable & Wireless PLC of Britain,
will unload its 14.5 per cent stake in CyberWorks as soon as possible.
Doing little to assuage worries is a deal last Friday with Telstra Corp., the
Australian phone giant, that lets CyberWorks reduce its debt from $9 billion to
$5.5 billion.
"I don't think there's any strategy," said Steven Schwankert, managing editor
for Asia at Internet.com, an online news provider.
"They say, 'We're doing this' and 'We're doing that,' but where is it?"
CyberWorks declined through a spokeswoman Thursday to comment on the stock
plunge or the criticism.
It's too soon to say whether the company has bottomed out. When the
stock-and-cash deal closed in August, it was worth $10 billion less than first
estimated, at about $28.5 billion. CyberWorks plans to take on more debt to
fulfil its ambitions.
CyberWorks is developing a high-tech centre - dubbed Cyberport - on the south
side of Hong Kong island in a deal it won without any competitive bidding,
drawing accusations of favouritism.
CyberWorks has finished constructing roads and bridges, but it has yet to put up
office buildings and apartments that were supposed to start opening late next
year.
CyberWorks spokeswoman Joan Wagner could not specify the total investment but
she said CyberWorks plans to borrow no more than $770 million for Cyberport.
Matthew McGarvey, senior Internet analyst at IDC China in Beijing, said
CyberWorks, also known as PCCW, seems to be evolving into "a gargantuan
amalgamation of businesses" with unclear direction.
"I think PCCW would be wise if they took some time explaining what their
business plan was and letting the public know," McGarvey said. "I don't think
anyone has a clue."
Traders also worry that Britain's Cable & Wireless PLC, which ended up with
billions of CyberWorks shares when it sold its majority stake in the Hong Kong
phone company, will dump the stock as soon as it can under terms of the merger.
Cable & Wireless sold a big batch last month but won't discuss future plans.
DIRK BEVERIDGE
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