Li at his happiest as audacious dealmaker
By Rahul Jacob
Published: February 6 2003 4:00 | Last Updated: February 6 2003 4:00
Even investment bankers marvelled at the speed with which Richard Li put together his multibillion dollar bid to take over Hong Kong Telecom three years ago.
And no wonder.
After news leaked that Singapore Telecom was in advanced discussions to buy Hong Kong's dominant telecommunications company from its British parent, Mr Li put together an audacious $28bn (£18bn) cash and shares offer in a breathtaking two weeks.
The deal was remarkable even by the standards of the Alice in Wonderland economics of the internet era.
Unlike AOL, to which PCCW liked to compare itself, PCCW had no internet customers at the time. Its business premise - a promise really that it never came close to keeping - consisted of providing broadband service to customers in China, India and Japan.
In the past couple of years, however, news on PCCW has revolved around cost-cutting and debt reduction rather than ambitious deals.
Far from being an internet darling, it has come to be perceived by investors as a plain old telephone company in a mature, stagnant market.
In the first six months of last year, it reported first-half revenues down 9.8 per cent at $1.31bn. Investors appeared unenthusiastic about a company that was dependent for well over 80 per cent of its revenues on a fixed line business in a city of 7m in the midst of a downturn with little prospects for growth.
In a cruel twist, PCCW was increasingly compared unfavourably to SingTel, which has investments in India and Indonesia, and its stock price continued to drop last year. It kept announcing a steady stream of cost-cutting initiatives. In November, it announced it was spinning off a technical services subsidiary with 3,000 of its 12,000 employees. As aclassic leveraged buy-out in action it was hard to fault, but some analysts said it was hard to believe that a consummate deal maker would be content to be labelled a cost-cutter.
News that Mr Li has approached Cable and Wireless to buy the company will not surprise observers in Hong Kong, who say he is happiest making audacious deals.
But his record at building and managing businesses is much less spectacular. Star TV, the pan-Asian television broadcaster he sold to Rupert Murdoch's News Corp in 1993, announced its first quarterly profits last year. Under Mr Li, Star TV peddled re- runs of old American soap operas that had a limited appeal on a continent where most viewers do not speak English. In the past few years under News Corp, Star has made impressive strides, building a leading position in India with popular Hindi language soap operas and game shows, and starting a Mandarin channel in China last year.
Those are the sort of pan-Asian growth prospects that PCCW promised when it started its internet business a few years ago.
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