COMPANY FOCUS - C&W's stuck with PCCW
February 20, 2001
By Trond Vagen, UK-iNvest.com
Telecoms group Cable & Wireless (CW. - news) has not yet found a buyer for its stake in Hong Kong's Pacific Century Cyberworks (PCCW), but the company is not particularly bothered -- and nor should investors be, say analysts.
The company ended up with a 20% stake in PCCW when it sold it Hong Kong Telecom for a mixture of cash and shares last year. It agreed to a three-part lock-up, which allowed it to sell 5% then, 7.5% now and the rest in August.
The 5% stake went for £1.3bn in September, but PCCW has fallen 57% since then (80% over the past year) so C&W is in no hurry to get rid of the devalued stock. In fact, at market prices, that 7.5% is worth only £677m.
It said on Monday it was still in "discussions about an orderly exit" but it hadn't decided when and hadn't found a buyer yet.
"I think it's well documented that the we have a strong cash position," said a C&W spokesperson. "Therefore we can afford to say like we did yesterday, that no timetable has been set for the disposal. For obvious reasons, we can't reveal the status of our negotiations with potential buyers."
Chances are there aren't that many, despite the relative cheapness of the stocks. Telecoms companies have put up so much money for 3G licences in Europe that few would be willing to spend cash on a minority stake in another company. And C&W wouldn't want to end up with another batch of shares which it will have to sell on again.
But it will sell the shares one day. "They don't want the stake," said one analyst. "But they have plenty of cash and the share price is low, so why sell now? I don't think they're close to finding a buyer -- otherwise they would have told us so."
Hong Kong Phooey
C&W is Europe's third largest network for Internet service providers (ISPs). Its shares rose 7p to 784.5p in London this morning. But PCCW shed more than 5% in Hong Kong overnight. PCCW shareholders are in a bit of a bind; the existence of a seller in the market is a recipe for a depressed share price.
PCCW is an Internet and telecommunications company run by Richard Li, the son of Hong Kong billionaire Li Ka-Shing, who runs Hutchison Whampoa, a sprawling conglomerate.
C&W sold Hong Kong Telecom last year so that it could get out of providing phone lines for homes to concentrate on providing data services to businesses.
For more investment ideas, click here
Trond Vagen is a staff writer for UK-iNvest.com.
ukinvest.co.uk |
