Hong Kong's boy wonder transformed
FT.com site; Dec 29, 2000
BY JOE LEAHY
He would have preferred to celebrate the completion that day of the takeover of Cable & Wireless HKT, Hong Kong's dominant telephone operator, by his internet startup company, Pacific Century Cyberworks (PCCW).
But although Mr Li went only out of a sense of duty, the play, The No 1 Restaurant, about the ups and downs of a famous Beijing chain that specialised in cooking Peking duck, turned out to be entertaining and strangely instructive.
"I thought it would be terrible. I was dreading to go but it was great," Mr Li says. "It had a lot of business philosophy in it. It talked about how the shop - in fact the brand - deteriorated. And how that family is no longer in control of the brand because of two screwed-up brothers. They were fighting."
It is difficult to ignore the irony in the story. The 33-year-old Richard is the younger of the two privileged sons of Li Ka-shing, Hong Kong's richest tycoon. Older brother Victor was picked to succeed his father in running the empire, leaving young Richard to make a name for himself.
In 1999 he pulled off PCCW's first big deal, an untendered contract from the Hong Kong government to build a large residential office - though there were swift allegations that his father's influence was somehow connected to the company's success.
And this year he really made his mark with the $28bn HKT takeover, Asia's largest deal outside Japan to date. It transformed PCCW from an internet company with some property interests to a telecommunications company that includes an old-fashioned fixed line service.
That change has taken on new significance as technology stocks have weakened throughout the year. Mr Li, once renowned for waxing lyrical about the internet, now emphasises his new acquisition's old-economy credentials. "It feels wonderful that there's a huge amount of solidity in the company [to] be able to weather storms."
PCCW shares have plunged nonetheless - to levels once unimaginable to Mr Li's harshest critics.
On the back of the first negotiations for the HKT deal, the stock had reached an all-time high of HK$28. By the end of the year it was a fraction of that figure. When PCCW shares collapsed to $4.85 in late November, one Hong Kong English-language tabloid emblazoned the damning price on its front page, in figures 6in high.
Mr Li was caught not only by the traditional stock slump that afflicts many newly merged companies. PCCW was also affected by falling telecom stocks and crashing internet technology prices worldwide.
And though his timing was impeccable in terms of taking over HKT - a deal that would probably have been impossible a few months later - it could not have been worse for investors who had bought into his internet dream.
The Hong Kong press reported the case of one woman who sold cigarettes in a corner store and had apparently lost 30 years of earnings by betting on PCCW shares. Mr Li, however, puts a different gloss on the story. He says he remembers reading about the cigarette seller and feeling uncharacteristically humbled. The worst part of it was, he recalls, he recognised the woman's face. He used to see her on his walk to work.
After a few days of feeling guilty, he went to find the woman, to see whether he could help. "I found out the whole thing was fictitious. In fact this woman was proud . . . she'd managed to send one of her kids to the United States for university.
"She said she bought very little [PCCW stock] and she bought it all the way up and down as well . . . Her average was not great but her average was still up."
The same is unlikely to be true for most PCCW investors, however, a fact that local opinion in Hong Kong may not let Mr Li forget.
Instead, this year he has looked for support in the most unlikely places. He began the year with a giant party, with Whitney Houston as the main guest. And he takes a strange kind of pride in a website set up by a Texas rancher, called the "Pacific Century Cyberworks unofficial information page". The bizarre site, on www.htcomp.net/ madd_dawg/pcclf/ page_1x.html, features research and news on PCCW, alongside a photo of the man and his family leaning against his pickup truck out on the ranch.
Despite such cheerleaders, at the end of the year the Li story is not what it was. He had made much of areas such as internet television when trying to sell his merger proposals.
But now the company is sharply reducing spending on its flagship internet television station Network of the World, which aims to serve the globe from a former shoe polish factory in west London. Indeed there are cuts in all of PCCW's e-commerce business-to-consumer projects. The company has spun off control of other high-growth parts of the old HKT business, such as its lucrative mobile arm.
Mr Li talks of the drive to "get back to fundamentals". He adds: "We welcome that." And, at the end of the year, it seems that the company behind his grand internet vision may one day be whittled away to little more than a decidedly old-economy telephone operation.
Copyright © Financial Times group |
