China Telecom Sells 1.3% of C&W HKT for $407 Mln to Invest Funds at Home
Technology News
Tue, 06 Jul 1999, 5:11pm EDT
By Biddy Chan with reporting by Joshua Fellman
China Telecom Sells 1.3% of C&W HKT for $407 Mln (Update1)
(Adds a fund manager's comment in the 3rd paragraph, and
more background throughout.)
Hong Kong, July 6 (Bloomberg) -- China Telecom (Hong Kong)
Group sold a 1.3 percent stake in Cable & Wireless HKT, Hong
Kong's dominant phone company, for HK$3.15 billion ($407 million)
to finance telecommunications projects in mainland China.
The group, controlled by China's Ministry of Information
Industry, sold 156 million C&W HKT shares at HK$20.20 apiece,
said Peter Burnett, head of equity capital markets at Warburg
Dillion Read in Hong Kong, which arranged the sale along with
Morgan Stanley Dean Witter.
''Better to sell now, and invest the profits in low-cost
assets in China,'' said Andrew Look, a fund manager at Prudential
Portfolio Managers Asia Ltd., which manages about $4.5 billion in
the region. ''By any way you look it, (C&W HKT) is very expensive
now.''
The price was a 6.5 percent discount to C&W HKT's closing
price today of HK$21.60, still near its all-time high of HK$22.55
on April 23. The stock has gained 66 percent since March amid
foreign optimism over the growth of its Internet business.
The share sale will leave China Telecom Group, controlled by
the Ministry of Information Industry, with a 10.86 percent
holding in Cable & Wireless HKT, known until this month as Hong
Kong Telecommunications Ltd.
China Hopes
China Telecom Group, also the parent of Hong Kong-listed
China Telecom (H.K.) Ltd., first bought into C&W HKT in June
1997, hardly a month before China resumed sovereignty of Hong
Kong. It paid $1.2 billion, or HK$14.25 a share, for a 5.5
percent stake. It also signed a letter of intent with Britain's
Cable & Wireless Plc that the two parties would become equal
shareholders over time.
The group then bought an additional 7.8 percent from China
Everbright Holdings Co., a Chinese company controlled by the
State Council, in February 1998 for $1.6 billion or HK$14.20 a
share.
Those purchases bolstered investors' hopes that C&W HKT
would be in a better position than its rivals to venture into
China's telecommunications market, one of the world's fastest-
growing.
Since then, however, C&W HKT has been bombarded by new
competition in Hong Kong. In January, it gave up its monopoly on
international direct dialing eight years earlier than planned,
though in return for HK$6.7 billion in cash compensation. In
March, Hong Kong allowed mobile phone users to change carriers
while keeping their numbers, prompting deep price cuts and
causing HKT to fall into second place by subscriber numbers.
The company reported its first decline in operating profits last
year, and has yet to initiate a major project on the Chinese
mainland.
''The sale will not affect the good business relationship
between CTHK Group and C&W HKT,'' said China Telecom Chairman
Wang Xiaochu in a statement.
''At present, CTHK Group has no plan to further dispose of
its shareholding in C&W HKT,'' he said. ''Also it will not rule
out the possibility of increasing its shareholding in C&W HKT
should circumstances be appropriate.''
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