February 15, 2000
Talk of a Telephone Bidding War Roils
Asian Markets
By WAYNE ARNOLD
INGAPORE -- Politics and the ambitions of a seductive Internet
start-up have thrown Asian markets into confusion over a
proposed merger between two of the region's communications giants,
Cable and Wireless HKT Ltd. of Hong Kong and Singapore
Telecommunications Ltd.
Barely 10 months old and already bigger than Amazon.com in terms of
market capitalization, the Hong Kong Internet upstart Pacific Century
CyberWorks Ltd. raised an additional $1 billion from its shareholders
Monday in what analysts said was part of an audacious plan by the
company's 33-year-old billionaire chairman, Richard Li, to buy a stake in
Cable and Wireless HKT.
CyberWorks announced on Friday that it was considering such a bid.
Cable and Wireless HKT and Singapore Telecom said their own merger
talks, disclosed three weeks ago, were still in progress. Cable and
Wireless HKT confirmed that CyberWorks had approached its parent
company, Cable and Wireless PLC of Britain, about a merger and that
financial advisers from both companies had met over the weekend, but
said that CyberWorks had not yet made a firm proposal.
Still, there was plenty of speculation Monday whether a CyberWorks bid
would complement or compete with Singapore Telecom. While some
analysts and investment bankers said an effort was under way to carve
up Cable and Wireless HKT, others saw the CyberWorks proposal as a
politically motivated attempt to reduce British ownership of the company
while preventing Hong Kong's nearly 130-year-old telecommunications
operator from falling into the hands of the government-controlled
Singapore Telecom.
It is no secret that China, which reclaimed Hong Kong from Britain in
1997, would like greater control of Hong Kong's telecommunications
industries. It is also well known that Cyberworks' chairman is the son of
the Hong Kong multibillionaire Li Ka-shing, whose company Hutchison
Whampoa is already a major provider of the territory's wireless phones.
The elder Li, moreover, has enormous influence among China's leaders.
"China has always wanted the Hong Kong telecommunications situation
to be resolved," said Dylan Tinker, an analyst with Deutsche Securities in
Hong Kong. "This would keep majority equity ownership in
China-friendly hands."
Cyberworks is so young that it has yet to turn a profit or even begin
marketing its services. That it could make a serious bid for a $41 billion
company is testimony to the frenzy for technology and
telecommunications stocks in Asia. In just a few months, Internet
euphoria has largely displaced concerns about the slow pace of financial
reforms in the aftermath of the region's financial crisis.
It also illustrates how in Asia, the enthusiasm among investors for almost
any company associated with the creation of the so-called new economy
is buttressing some of the region's old family fortunes.
The younger Li is already a veteran deal maker. In 1993, he sold the
family television network, StarTV, to Rupert Murdoch. Last year,
CyberWorks said it had acquired stakes in 13 high-technology ventures
for $600 million.
The parent Cable and Wireless PLC owns 54 percent of its Hong Kong
namesake. Chinese companies own roughly 18 percent. Several reports
have said that talks with Singapore Telecom are snagged on the
insistence by Cable and Wireless HKT that the Singapore government's
voting rights be limited well below its roughly 40 percent stake in a
combined company.
CyberWorks officials could not be reached for comment. Officials for
both Cable and Wireless HKT and Singapore Telecom declined to
comment on CyberWorks' proposed bid or the speculation surrounding
it.
Cable and Wireless remained insistent that its original merger plan still
made sense despite reservations among analysts about the wisdom of
combining two incumbent operators so far away from each other.
"Distance is irrelevant in telecoms these days," said Simon Smith,
manager of investor relations at Cable and Wireless HKT. "The industry
is about global consolidation, customers, service development."
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