Values questioned on Telstra-PCCW offshoots
By JAN EAKIN
Monday 11 December 2000
Analysts yesterday questioned valuations of three major stockmarket floats flowing from the joint venture between Telstra and Richard Li's Hong Kong-based Pacific Century Cyberworks, which are expected to raise $2.7 billion, according to a shareholders agreement compiled by the two companies.
The Federal Government has also come under fire after the documents revealed that the 50.1 per cent government-owned Telstra would establish holding companies for the multi-billion-dollar Asian joint ventures in Bermuda, a move seen as an attempt to avoid paying taxes in Australia.
The estimates, disclosed in the shareholders agreement document compiled by Telstra and PCCW, suggest that the float of its Asian Internet service, IP Backbone Company, valued at $US10 billion ($A18.38 billion), will raise $US1 billion.
A listing of the Regional Wireless division would raise $US310 million, and an international data centres division $US200 million.
The documents, details of which were published in The Australian newspaper on Saturday, also indicate that both Telstra and PCCW want to complete the floats as quickly as possible once the joint-venture agreements and transfer of assets have taken place.
That deal could be sealed as quickly as Friday, although the two parties have accommodated the possibility of later deadlines, the next one being set for March 31, 2001, and after that June 30.
Concerns have been raised, however, over the lack of any information on the underlying debt complexities of each division to be floated.
"The challenge is understanding what is underneath these valuations, exactly how much debt is involved, particularly with the Internet business," said Roger Casey, head of telecommunications, media and technology at ABN Amro's corporate finance division. "Also, with the regional wireless company, the Hong Kong mobile business needs to fill in the footprint and actually build up a regional position. There's a great window of opportunity for them to do that, although with Telstra still 50 per cent-owned by the government, it's made more difficult because that mobile division won't be involved."
Telstra yesterday defended itself on the location of its PCCW companies in Bermuda, arguing that it benefited shareholders.
"Any assets which Telstra has in the joint-venture companies will be subject to the normal capital gains provision of the Australian Tax Act, and any profits made by that company will be subjected to the tax rules of Australian-controlled foreign companies," a Telstra spokesman said.
"It is not correct to suggest Telstra assets are being shifted offshore because what we are talking about are assets which are part of a JV which are already located throughout Asia.
"Being located in Bermuda will assist future listings on a number of international stock exchanges, and it is a common method of achieving listings," he said.
SMH
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