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Technology Stocks : PCW - Pacific Century CyberWorks Limited

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To: pennywise who started this subject	7/12/2001 1:33:49 PM
From: ms.smartest.person	Read Replies (1) of 2248

Telstra likely to cut PCCW value Christine Lacy 10/07/2001 The market increasingly expects Telstra Corp to slash the valuation of its $US1.8 billion ($3.5 billion) strategic alliance with Mr Richard Li's Pacific Century CyberWorks in its full-year accounts. Analysts predict that Telstra's full-year accounts could be dominated by a multibillion-dollar writedown of goodwill flowing from its purchase of a 60 per cent stake in Regional Wireless Co. A fall in profit is also expected from the sale of assets into the pair's Reach infrastructure company as valuations in the sector plummet. While Telstra is not saying how it plans to account for the joint ventures, speculation is mounting that the writedowns are inevitable. The accounting treatments are non-cash items and so have no impact on Telstra's discounted cash flow valuation, but analysts believe the issue will directly affect sentiment towards the stock. Yesterday Telstra's shares had a respite from negative sentiment, lifting 25¢ to $5.30 as investors bought in the belief that the stock was cheap after it fell below $5 last week. Also yesterday, as PCCW began a roadshow for a $US2.5 billion ($4.9 billion) bond issue to change the maturity profile of its borrowings, the Reach joint venture said it had secured a licence to operate in Singapore. But potential writedowns remain a problem for Telstra, with BNP Paribas joining the likes of CSFB to warn that the effect of the writedowns on Telstra's accounts could be extreme. In a fresh report, BNP said up to $1.2 billion in goodwill associated with RWC could be written off by Telstra, in line with the decline in sector valuations in Hong Kong. In another new report, Deutsche Bank saw no upside potential in the Hong Kong mobile market until consolidation was played out there. "We believe the current malaise in the Hong Kong mobile market is caused by the high level of churn - around 5 per cent per month," it said. "It is unlikely that that churn - and hence profitability - can begin to ameliorate until the market consolidates from the current unstable six players to at least four." A downward revaluation of Reach will reduce the amount of profit on the sale of Telstra's assets into the venture that can be recognised in the Australian group's accounts, half of which was to be recorded up front and the balance over 15 years. © This material is subject to copyright and any unauthorised use, copying or mirroring is prohibited. This story was found at: afr.com

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