The $38-Billion Man
How Li pulled off a mega-deal
cnn.com
Richard Li Tzar-kai, 33, recently had his hair closely trimmed for "better ergonomics" when he goes scuba-diving. "Also, the company is doing so well that I think I can get away with it," says the chairman of Hong Kong Internet company Pacific Century CyberWorks. Ten-month-old PCCW has just pulled off an audacious bid for Cable & Wireless HKT, Hong Kong's dominant telecom provider, beating state-controlled Singapore Telecom for the prize. Li spoke with Asiaweek's Yulanda Chung the day after the $38.1-billion deal was signed.
Asiaweek: Some in Singapore call you a copycat bidder because you waited several weeks after Singapore Telecom made its offer.
Li: We have a lot of strategic plans, some of which we carry out in parallel. I didn't come up with this idea [of acquiring HKT]. I was overseas looking at other deals and I got a call from a colleague suggesting [buying HKT] is actually a better plan. For the first 20% of the transaction, I wasn't directly involved. I didn't instigate the idea.
There were fears about the Singapore government's control by proxy of HKT if SingTel won the bidding. Do you agree with this view?
My opinion doesn't matter. The opinion of other people does not affect our decision either.
At one point, you proposed to join SingTel in a joint bid. Why did this fall through?
SingTel wants control over the running of HKT. At the same time, it doesn't want us [PCCW] to enter the Singapore market. Is that fair?
We put out one offer and we never changed it. Cable & Wireless [the London parent that owns 54% of HKT] sees the combined value we offer. [C&W chief executive officer] Graham Wallace understands what we are trying to do. I want him to be one of the two directors C&W can put forward to the board.
Did you secure the support of the government in Beijing or in Hong Kong?
That's bull. I was in Beijing just before Chinese New Year, but I was there for something else. I met the head of Bank of China for something else. Francis [Yuen Tin-fan, PCCW's deputy chairman] arranged the loan in 48 hours. I haven't seen Liu Jinbao [Bank of China CEO for Hong Kong and Macau] throughout the whole deal and I will only go see him this afternoon.
Rupert Murdoch's STAR TV, which allied itself with SingTel, has a deal to provide content on its 50 satellite TV channels for HKT's broadband network. Is that agreement in jeopardy?
If they're not willing to continue, they have the ability to pull out. I'd like to discuss that with [Murdoch flagship] News Corp. when appropriate. But there must be willingness on the other side. It did come as a surprise [when Murdoch teamed up with SingTel] but businessmen do not make decisions based on feelings. There is no animosity on my side. We already have the largest sports content in the world [through a venture with America's Trans World International], some 5,000 hours plus 5,000 hours of events and music content. No, we are not at the moment talking with TVB [of Hong Kong, Asia's largest programmer of Chinese-language shows].
What can an as-yet-unprofitable start-up like PCCW bring to a proven moneymaker like HKT?
I don't think I have to apologize for the infrastructure of our company. We've been scrambling to keep pace with its development. What we have now [with HKT] is access to a huge pool of talent. PCCW can help unlock HKT's potential to go regional. HKT also has 1 million digital subscriber lines in Hong Kong, more than anywhere in the world. It has a proven platform for broadband delivery. It has 500,000 Internet subscribers [to a service] that works cool. And good cash flow as well.
We want [PCCW-HKT] to be a one-stop shop, in which we are able to own our customers. I prefer the AOL-Time Warner model. What they have done is to [marry] content and connectivity, with content weighing a lot heavier. In our case, the emphasis is more on the people [in PCCW and HKT]. We face the same situation as AOL-Time Warner with investors who like pure Internet plays [and are therefore selling the stock because of the acquisition].
Will you sell off HKT's mobile-phone network?
I haven't thought that out yet. There is no immediate plan to sell anything. But you know, Hutchison [Telecom, which is owned by Li's father, Li Ka-shing] may have one or two customers more, but in terms of revenue per minute and totality of service, HKT is superior to Hutch.
This brings us to criticism about your family's monopoly of the telecom sector, among other industries in Hong Kong.
I will never use my [position] in PCCW to rig [telecom] prices with Hutch and cheat the public. I will resign from Hutch [he is currently vice-chairman of Hutchison Whampoa, owner of Hutchison Telecom] when the merger is successful. I was twisted into taking 5% of Tom.com [the Internet portal owned by his father which listed March 1].
Do you think you could have secured the record $11-billion loan you need to acquire HKT without the weight of your surname?
Just look at our target. HKT has no gearing [debt]. The loan doesn't even have my personal guarantee. |
