Bart --
My pleasure:
Direct from the Financial Times:
(Incidentally, it's a good site to bookmark (registration free), as they have excellent coverage of HK and the Asia-Pacific.)
Pat
<<<
WEDNESDAY JUNE 11 1997
By Louise Lucas
As the territory's last significant British-controlled monopoly, Hongkong Telecom is firmly in the spotlight. And, as the last weeks of British rule tick by, Hongkong Telecom's share price has been chased up by investors betting on China interests eroding Cable & Wireless' 58 per cent controlling share.
The big money is on the Chinese Ministry of Posts and Telecoms (MPT)as buyer. Hongkong Telecom itself, which has shied from the subject of a possible sale, flagged as much last month after China Unicom, MPT's young and struggling competitor, expressed an interest in the Hong Kong carrier.
Speaking at the annual results, Mr Linus Cheung, chief executive of Hongkong Telecom, acknowledged discussions with both the China operators, and added: "Hongkong Telecom has maintained a much closer relationship with the MPT than with China Unicom."
But if investors are betting on MPT as a buyer, they are much less clear on what the sale terms would be, and even on what such a deal stands to bring in the shape of concrete benefits for Hongkong Telecom.
The hope (and what has inflated the share price) is that it would offer an entree into China's telecoms sector, from which foreign equity participation is now barred. Thus Hongkong Telecom is metamorphosed from a utility in an increasingly competitive marketplace to one at the face of a hugely undeveloped market.
But not all analysts expect MPT to pander to this scenario. As a commercial entity it is unlikely to divert profitable contracts into Hongkong Telecom which it could keep for itself. And even a sizeable stake would not necessarily prevent it from setting up shop in Hong Kong to tap the lucrative China-Hong Kong traffic which makes up almost half of Hongkong Telecom's international business.
Mr Dylan Tinker, telecoms analyst with Jardine Fleming, reckons the carrier's current China project - the construction of a Hong Kong-Beijing fibre optic backbone - could typify the sort of contracts offered even after an MPT deal.
"This is indicative of the type of deal the MPT will farm out to Hongkong Telecom - low return, no equity ownership, capex intensive and technically challenging," he says.
As for the putative deal structure, most analysts anticipate an asset swap. This in part reflects the high cost of buying a significant stake in the $23bn Hongkong Telecom. An asset swap would contravene the 'no foreign ownership' rule.
However, Mr Tinker argues that there are signs this law could be relaxed early next year and that by limiting the swap to cellular assets, MPT relinquishes control on an activity which is neither overly sensitive nor lucrative, but rather requires heavy capital expenditure.
This suggests a deal may not be coming quite so soon as investors are hoping, but the waiting period certainly strengthens Cable & Wireless' hand if the share price continues to rise amid speculation. Besides, the question of Hongkong Telecom's future has been a long-running one. In April last year, speculation intensified when Hong Kong's aviation industry was restructured to give China interests a bigger slice. This was followed in January by a similar deal over China Light and Power, the territory's biggest electricity supplier.
Meanwhile, Citic Pacific, the Hong Kong-listed arm of Beijing's main investment agency and the vehicle through which China holds its aviation and power interests in the territory, was gradually paring back its holding in Hongkong Telecom. In January last year it reduced its stake from 12 per cent to 10 per cent. This was further trimmed to 8 per cent five months later.
The company completed its exit from Hongkong Telecom last month, selling its remaining 8 per cent stake to China Everbright Holdings, an investment company directly controlled by Beijing's state council, for HK$11.39bn.
Analysts immediately branded the deal as the first phase of a more sweeping restructuring. "It's the beginning of the story, not the end," said Mr Jason Billings, head of telecoms research at SBC Warburg in Hong Kong.
China's interest in Hongkong Telecom goes beyond the dilution of British interests. While deregulation is making its mark in Hong Kong as in other parts of the world, the carrier still enjoys a lucrative slice of the territory's telecoms business.
Hongkong Telecom's biggest moneyspinner is its international direct dial franchise (IDD), which last financial year contributed 52 per cent of total revenues.
But the company is seeking to reduce this reliance as it loses market share to its three competitors, who are estimated to have taken an aggregate 20 per cent slice of the market since launching services last year.
In addition, the Hong Kong regulators - as part of World Trade Organisation commitments - are seeking an early end to Hongkong Telecom's IDD monopoly, which runs through until 2006. These two events have forced the carrier to turn its attentions to other areas of growth.
Hongkong Telecom has committed HK$10bn over 10 years to its interactive media services (IMS), a bundling of internet, video-on-demand (Vod) and home shopping. Customers will have their first taste of interactive TV this summer when the service is unrolled to 2,500 households. The full launch is due in October - which means Hong Kong will have the first commercial fully-fledged interactive TV services, ahead of the US and Singapore (due to come on line next year).
Analysts, however, are less convinced by the commercial merits of IMS.
For a company facing assaults on so many fronts, Hongkong Telecom could well see the MPT as its white knight. But without admission to lucrative China projects, the change in ownership may mean less to Hongkong Telecom than investors think.>>>
Here's some additional stats I found yesterday:
gold.itu.ch
<<The Asia-Pacific region is the world s largest single market for telecommunications products and services. Investment in the region's telecommunications market over the next five years is expected to exceed US$ 300 billion. The region is also the fastest growing and most dramatically changing on the planet. The number of cellular subscribers in the Asia-Pacific region will overtake that of Western Europe during 1996 and that of the USA in 1997.
gold.itu.ch |
