LIKE father, like son: Li senior and junior share game plan
LIKE father, like son.
Richard Li would probably wince at that comparison with his father, Hongkong tycoon Li Ka-shing, considering that he has always wanted to strike out on his own.
He came close to stepping out of his father's long shadow after his upstart company, Pacific Century CyberWorks, successfully bought the venerable Cable & Wireless HK Telecom for US$28.5 billion (S$48.4 billion) in a cash and stock deal last year, the biggest corporate takeover outside of Japan.
With a buzz hair cut and at 34, Mr Richard Li was hailed as the new Internet whiz kid after his audacious takeover of HK Telecom. In fact, he has been credited with jump-starting Hongkong's Internet fever.
But ironically, it is in his ambition to turn an Old Economy company, with miles and miles of fixed telephone lines, into a hip New Economy company that he actually comes closest to emulating his 72-year-old father's Internet strategy.
Same prescription: For both father and son are using the same prescription to deal with the bombed-out Internet sector: leveraging on profitable Old Economy businesses that bring in the real money to support their loss-making nascent Internet business.
The senior Mr Li's Internet venture, Tom.com, which was such a hot item when it came to market a year ago -- investors had fought for a piece of it -- has been paying big bucks for really Old Economy companies. The Hongkong-listed Tom.com, in a drastic overhaul of its cyberspace plans, has invested about US$100 million in a series of media companies over the past half year or so.
Boosting revenues: Tom.com, a portal for the Chinese market, paid US$30 million for a majority stake in YC Companies, a mainland Chinese sports event and marketing company which also churns out sports television programmes.
Then it spent about US$40 million to acquire a 49 per cent stake in French Star, another Chinese company which operates a network of billboards. It also paid US$22 million for Maya Cultural, another outdoor media company.
Just earlier this month, Tom.com paid HK$60 million for a 50 per cent stake in Chinese magazine Yazhou Zhoukan from Hongkong company Ming Pao Enterprise. Yazhou Zhoukan, which focuses on current affairs in Asia, has a circulation of more than 100,000 copies.
All very Old Economy acquisitions. But for sure, they are helping to hold up Tom.com's revenues.
Revenue grew more than five-fold to HK$70 million (S$15.4 million) in the quarter ended Dec 31, 2000, from HK$13.2 million a year ago. Losses too were trimmed, from HK$163.9 million down to HK$78.3 million.
When Mr Richard Li mounted the takeover of Hongkong Telecom a year ago, analysts saw his company, Pacific Century CyberWorks, as injecting zip into a company that was profitable but complacent because of its stronghold in the domestic telecoms market. The tables have since been turned, however.
CyberWorks, which borrowed HK$12 billion to finance the takeover -- is now counting on Hongkong Telecom as its cash cow to pare down the huge debt it incurred as a result of acquiring the telecoms company, and also to finance new Internet projects.
Morale down: Staff at HK Telecom grumble that they are worse off under the new management and morale has taken a hit. The No 2 at CyberWorks, deputy chief executive Norman Yuen who came from HKT, resigned recently, just a few months after the acquisition was officially completed last August.
While CyberWorks is counting on HK Telecom, revenue at the telecoms unit is faltering. Net profit fell a sharp 90 per cent to HK$1.14 billion for the financial year ended March 2000, due to de-regulation and provision on fixed and other assets. Analysts expect the merged company to report a loss this year.
At the same time, Cyberworks's Internet ventures are sucking up cash faster than HK Telecom can generate it.
One of them, the grandiose Network of the World -- critics say it stands for No One Watching -- has flopped and the headcount in its London office is being reduced. Network of the World beams original content via satellite, combining TV viewing with surfing the Net.
Helping hand: As the Internet rescue strategies of father and son mirror each other, it also looks increasingly likely that the senior Mr Li will lend a helping hand to his son, despite the denials.
Just last month, CyberWorks sold 183.5 million shares at HK$4.375 apiece to Hutchison Whampoa, a conglomerate controlled by the senior Mr Li. In exchange, CyberWorks received a stake in Hutchison Telecommunications Investment Group (HTIG), part of the Hutchison stable. HTIG, a satellite communications operator, earned HK$14 million (S$3.1 million) in after-tax profit last year. Critics said CyberWorks got a good deal, as Hutchison should have asked for cash.
The son might chafe at the fact that his father has had to bail him out again. But, as they say, blood is thicker than water.
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