India Beachhead for CyberWorks Suffers a Setback
Abhay Singh Bloomberg News
NEW DELHI An online access venture that was supposed to spearhead a push into India by Pacific Century CyberWorks Ltd. has scaled back its plans, a victim of declining expectations for Internet companies and their stocks.
But executives at the venture, Data Access (India) Ltd., say the setback is temporary and that it will regroup and build for the future. Data Access, backed by Pacific Century CyberWorks, the Hong Kong telecommunications company run by Richard Li, will target four cities instead of 26 after slashing its investment plan by 60 percent, the executives said.
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The company said in August that it planned to spend $100 million for high-speed broadband connections across India. Now, it will spend $40 million to offer dial-up services in New Delhi, Bombay, Bangalore and Madras. Chasing subscribers made sense "when the stock markets were giving valuations on the basis of number of connections," the company's founder, Siddhartha Ray, said. "But that valuation is gone."
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By trimming expansion, Data Access hopes to post its first profit next March and to sell shares to the public by mid-2002, Mr. Ray said. CyberWorks, whose shares sank 83 percent in 12 months, is scaling back in Asia after losing $886 million last year, reflecting $667 million of write-offs for Internet investments.
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"CyberWorks was trying to invest beyond Hong Kong amid slowing growth in its Hong Kong business," said David Loo, an investment adviser in Hong Kong with Coutts Bank (Schweiz) AG, which owns CyberWorks shares in a private fund. "The cost of running those investments has in turn impaired their financial positions which are already very weak."
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CyberWorks has had its share of problems in Asia. GigaMedia Ltd. of Taiwan scrapped plans in September to form a venture with CyberWorks to deliver Internet content. A CyberWorks partnership with Telstra Corp., Australia's biggest phone company, also experienced hiccups before it was completed in October. CyberWorks gave up control of the venture's mobile-phone business to Telstra, which invested, through convertible notes, 50 percent less than originally expected.
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Data Access said it was pushing ahead with its scaled-back expansion plans. The Indian company is 74 percent owned by CyberWorks through Pacific Century Convergence Ltd.
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Its dial-up service has signed up 107,000 subscribers and hopes to more than triple that number by the end of the year. The market in India for Internet access services is expected to grow to 10 million subscribers by March 2003 from about 2.5 million now, industry sources said.
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