10/19/00 - Hongkong Telecom Deal Gets Approval, With a Condition
Business and Finance - Asia
By GREN MANUEL and KENNETH WONG
Staff Reporters of THE WALL STREET JOURNAL
The purchase of Hongkong Telecom by a company whose chairman is Richard Li was conditionally approved Tuesday by Hong Kong broadcasting authorities despite concerns of media concentration.
The government's approval was required because Hongkong Telecom's video-on-demand operation, now part of Mr Li's Pacific Century CyberWorks Ltd., holds a broadcasting license while Mr Li's father, Li Ka-shing, controls Metro Broadcast, a local radio broadcaster.
A government spokesman said cross-ownership restrictions were waived because the two licensees were in different media and there was no impact on competition. It was revealed that the two companies had pledged that there will be no cross-management, cross-control or cross-subsidization between Metro and the video-on-demand operation. The decision was taken by Hong Kong's chief executive, Tung Chee-hwa.
Shares in CyberWorks continued to decline on the Hong Kong market, closing at an 11-month low of 6.30 Hong Kong dollars (81 U.S. cents) Wednesday, as analysts continued to fret about its earnings and debt. The stock's decline contributed to the Hang Seng Index's fall 2.8% Wednesday, down 414.91 points, to 14458.52 -- its lowest closing level since May 30.
Investors are disappointed about the new deal with Telstra Corp. and have "completely lost confidence" in the stock, said a research analyst at a major Chinese bank. However, he said the stock will likely have strong support at HK$6, though if it falls below this level, it will trigger future selling.
Other technology stocks in Hong Kong had a dismal day after comments by U.S.-based Morgan Stanley analyst Mary Meeker, who said that ultimately only four to five Internet companies can survive in Asia. Among the worst hit was tom.com, a company controlled by Li Ka-shing; the stock slipped 5.7% to HK$2.93.
The only light for the city's technology sector was that two local mobile-phone companies had won licenses to operate networks in neighboring Macau. Consortia based around Hutchison Telecom, a unit of Hong Kong conglomerate Hutchison Whampoa Ltd. and SmarTone Telecommunications Holdings Ltd. have each won a license to operate a wireless mobile network, the Macau government said.
The two Hong Kong companies are the only winners among eight applicants for the licenses, a government spokeswoman said.
The former Portuguese colony is taking the first steps to deregulate its phone system. It has a population of about 450,000.
Write to Gren Manuel at gren.manuel@awsj.com1 and Kenneth Wong at kenneth.wong@dowjones.com2.
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