PCCW postpones Net, cable
projects
by Hong Kong iMail Staff reporter and Bloomberg
PACIFIC Century CyberWorks (PCCW) has put its underwater global fibre project 1 CyberNetwork (1CN) on hold and postponed the start of any new internet
protocol (IP) backbone projects until it is able to seek funds, deputy chairman Francis Yuen Tin-fan said yesterday. ``If we are able to raise funds, we will
aggressively do new projects; otherwise we will be less aggressive,'' said Mr Yuen. PCCW (0008) and Australia's telecom giant Telstra formed a 50-50 IP
backbone joint venture in October, aiming to tap into the market demand for underwater cable services. It planned to raise US$2 billion (HK$15.6 billion)
initially, but cut that figure to US$1.5 billion a few weeks ago because of a lukewarm response from banks. The US$500 million cut from the fund-raising
exercise had originally been reserved for new projects and the reduction might limit investment in new projects, Mr Yuen said. Any investment delay may put
pressure on the joint venture's earnings. CyberWorks forecast sales from its underwater cable to rise 6 per cent this year to US$1.9 billion and more than
double to US$4.5 billion by 2007, according to Bloomberg News, which cited a PCCW internal document. Some analysts, and reportedly PCCW, put the
highest market valuations, of between US$10 to $20 billion, on the IP backbone joint venture, more than twice the valuation of its wireless and data centre
ventures, However, Mr Yuen said yesterday that no timetable had been set to list the IP backbone company. ``We will have to wait after setting up the
ventures and have the chief executives discuss the business direction and then the listing plan afterwards,'' said Mr Yuen. Meanwhile, both PCCW's US$4.7
billion refinancing and its deal with Telstra would be completed by February 15, Mr Yuen said. The recent interest rate cut had helped debt-ridden PCCW
largely offset the increase in the interest rate margins of both its US$4.7 billion refinancing and the US$1.5 billion loan for its backbone venture, Mr Yuen said.
He added that the company would be pleased if there was another rate cut at the end of January, which would lower future loan costs. Even if there was a
further rate cut by the end of January, Mr Yuen was confident that banks were unlikely to adjust interest rate margins again. ``We absolutely don't believe
banks will adjust the interest rate margin, as the rate cut has no direct relationship with the interest rate margins,'' said Mr Yuen. He declined to comment how
much it will pay in interest expenses this year but said there would not be any major difference after the recent rate cut. PCCW has about US$1.4 billion cash
on hand and together with the loans, Mr Yuen said it had sufficient funds to develop over the next three to five years. Mr Yuen declined to comment on how
much cash the company would have after the US$4.7 billion refinancing. PCCW's shares hit a new 52-week low yesterday of HK$4.60 before recovering in
late trade. The stock finally closed down 3.11 per cent at $4.68.
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