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Technology Stocks : PCW - Pacific Century CyberWorks Limited -- Ignore unavailable to you. Want to Upgrade?

To: ms.smartest.person who wrote (255)	2/7/2001 9:20:16 AM
From: ms.smartest.person	Read Replies (1) \| Respond to of 2248

Telstra net backbone slips a disc Glenda Korporaal 07 February 2001 HONG Kong analysts have significantly downgraded the value of Telstra's internet protocol backbone joint venture with Hong Kong's Pacific Century CyberWorks on the eve of today's expected launch. Dresdner Kleinwort Benson telco analyst Eric Tomter estimated yesterday that the IP backbone company, the largest of the three joint ventures being finalised between Telstra and PCCW, would only be worth some $US3 billion ($5.5 billion) compared to his original valuation of $US5 billion last June. The values also compare with a $US10 billion number cited in documents supporting the Telstra-PCCW joint venture previously disclosed in The Australian. Mr Tomter is predicting the low market valuation, due to increased competition in the Asia-Pacific market and market concern about the outlook for internet and telco stocks, will prevent the partners from going ahead with floating the new joint venture this year. Jardine Fleming, which originally valued the joint venture at $US9.5 billion, cut its valuation to around $US5.6 billion in a report issued last November. Mr Tomter warned the market problems could cost the joint venture vital funds needed to upgrade PCCW's existing undersea cables, putting the venture at a cost disadvantage compared with new companies coming into the market. Telstra and PCCW are expected to finalise the multibillion deal tonight, including the announcement of the new chief executive of the IP backbone company who is expected to come from outside both organisations. The partners had initially hoped to float the joint venture companies this year to raise funds for expansion but now say the three will be floated "as soon as possible in the right market conditions". "It is unlikely they will be able to float the backbone company this year," Mr Tomter told The Australian. Mr Tomter predicted that new entrants into the Hong Kong undersea cable market such as Asia Global Crossing and Level 3 Communications would significantly increase capacity and drive down prices in the Asian market. "There is a significant amount of competition and a significant amount of bandwidth coming into Hong Kong," he said. "In the past Hong Kong Telecom [owned by PCCW] had the market to themselves." Mr Tomter said he had reduced his valuation of the joint venture in the wake of recent quotes on leased circuits by Asia Global Crossing which were some 20 per cent lower than what PCCW was quoting last year. He said the inability to float the Telstra-PCCW joint venture could limit funds to upgrade the undersea cable network to be owned by the joint venture. This would mean that its rivals with more modern cables would be able to offer their services at a lower price. "The cables owned by PCCW are older and smaller [than those owned by the new entrants]," Mr Tomter said. "They need the financing to upgrade their cables to compete with some of the new companies such as Global Crossing." theaustralianit.com.au