THE AOL of CHINA HOAX
Last year in its initial announcements on China, New Tel had claimed it would be working with MOFTEC web sites ...It's even in Ray Dirks original buy report and followed by a special appearance by Ray Dirks on CNN.
MOFTEC OR NO MOFTEC? (Ministry of Foreign Trade, China)
"How could a company own or have the government's websites? That's just not the Chinese way. I never heard about Xinhua Holdings and New Tel. I can say definitely the MOFTEC will not hand over our website"......Xiang Feng, director of the Government Network Department of the MOFTEC
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New Tel aims to lead in China 11-24-99
http ://www.transcom. com. au/newtel/pressr.html
Second tier Australian carrier New Tel yesterday announced ambitous plans to become China's leading internet service provider and portal.
The company is expected to purchase 18 websites from the Chinese Government, through the Xinhua News Agency, for a cost of $400 million.
This will be funded through the issue of 200 million new shares at a nominal price of $2 -- a hefty premium to the current stock price, which was 11c stronger at $1.56 yesterday.
New Tel plans to raise a further $200 million in the United States (where it is Nasdaq listed ) through an equity placement of 100 million shares at $2 each, to fund its expansion into China.
"We have had very strong interest out of the US and raising the $200 million will not be an issue," a company spokesperson said.
The restructuring will deliver a 49 per cent stake in New Tel to Xinhua and increase New Tel's market capitalisation by more than seven times to just under $1 billion.
"We aim to be the America Online of China because in this business you either get big or you get out," the managing director of new Tel, Mr Peter Malone, said.
"If they can raise $200 million then anything is poossible. China is the flavour of the month and you cannot be too critical of someone who has formed a partnership with the Chinese Government," the fund manager said.
China is seen as the fastest growing internet market in the world, with 33 million subscribers expected to be online by 2003, compared with current levels of around 7 million.
The company said it would begin due diligence on the acquisition shortly and is expected to take over the business in early February.
One of the sites New Tel is understood to be buying is that of the Ministry of Foreign Trade (Moftec), which receives more than 21 million hits a month and provides information on Chinese businesses.
The company said the revenue generated from one advertising banner on the site, priced at 3c per hit, would generate around US $5 million (7.8 million) a year.
New Tel will establish a Chinese internet service provider and a Chinese/English language portal, in conjuction with enterprises owned by Chinese Government.
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FROM RAY DIRKS FIRST BUY REPORT
In strategic alliance with China's Xinhua News Agency, New Tel has two primary business segments: (a) providing telecommunications services and equipment to Chinese-speaking people in Australia; and (b) by the end of fiscal 2000 (ending June), ISP/Internet Portal services in China. Xinhua recently announced that New Tel was acquiring 18 websites from the Chinese Government which collectively has 7 million daily users ... including China's Ministry of Foreign Trade website. Usage is projected to increase to 33 million users by 2003. Upon consummation of this transaction, Xinhua will hold a 49% equity interest in New Tel.
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Serious doubts about Central Plank of Aus Telco's $200m Fund Raising
PERTH, BEIJING, HONG KONG, DEC 4 2000: A top official at the Beijing Headquarters of Xinhuashe, the New China News Agency, has told ComputerWire there is no link between the Chinese-government owned body and Australian junior telco New Tel Ltd.
The Perth, Australia based New Tel has been claiming for more than a year that it is launching a major Chinese internet service and content operation in association with Xinhua Holdings Company Ltd, which it maintains is a "commercial arm" of Xinhuashe. New Tel is about to try and raise AUD200 million (US$107 million) from investors in Australia and the US on the strength of this.
ComputerWire, the international intelligence agency for the information and communications industries, has discovered a number of anomalies in the story New Tel has been telling.
These include:
* Zheng Jinsheng, the director of the general manager's office at Xinhuashe headquarters in Beijing saying: "Xinhua Holdings Ltd has nothing to do with the Xinhua News Agency".
* A company search on the Hong Kong-based Xinhua Holdings Ltd revealed the only shareholders are two Hong Kong resident individuals, Zhou An (who is also a director of New Tel) and Zhang Gaoliang.
* A company search on another Hong Kong registered company New Tel is proposing to buy in return for 120 million New Tel shares also has Zhou An as a director and shareholder along with a corporate shareholder and director, Netway.com Inc. Total paid up capital is only HKD10,000 ($1,280). It was registered in June this year.
* A third Hong Kong company which New Tel is proposing to buy for US$24 million also has corporate shareholders and a corporate director and paid up capital of HKD10,000. It was registered in May this year.
The full story, which is published in the Monday Dec 4 edition of ComputerWire's Network Briefing Daily is attached to this press release.
Contact in Europe: Editorial Director Phil Jones on +44 61 8 20 7208 4281, philj@computerwire.com In Asia Pacific: Bureau Chief Mike Newlands on +61 8 9214 3955 (Off) +61 403 275627 (mob), miken@computerwire.com
From Network Briefing Daily, Monday Dec 4 2000
China's Official News Agency Denies Xinhua Link
Xinhuashe, China's official government owned news agency, has categorically denied that it has any commercial ties with the Perth, Australia telecoms operator, New Tel Ltd or its Hong Kong-based partner, Xinhua Holdings Company Ltd. The official denial is a potentially disastrous blow to New Tel which is seeking to raise AUD200m ($104m) to build a major internet presence in China, and which has consistently linked these plans to its claimed commercial links with Xinhuashe.
New Tel first claimed to be planning an "AOL"-scale China internet strategy in November last year. At that time it announced a deal with Xinhua Holdings Company Ltd, a company that it described as the Hong Kong investment arm of the Xinhua News Agency. More recently, New Tel said Xinhua Holdings was a commercial arm of the Xinhua News Agency.
However, ComputerWire has learnt that no official Chinese body has any shareholding in Xinhua Holdings, and Xinhuashe, the official Xinhua News Agency, has denied any involvement with the company or its Australian partner.
Indeed, according to Zheng Jinsheng, the director of the general manager's office (a position similar to that of the managing director of a private company) at Xinhuashe's Beijing, China headquarters "Xinhua Holdings Ltd has nothing to do with the Xinhua News Agency."
"We heard about the joint venture between Xinhua Holdings Ltd with Australian company New Tel, but it has nothing to do with the Xinhua News Agency," Zheng told ComputerWire.
It is worth noting there are hundreds of Hong Kong companies and thousands in mainland China with the name Xinhua which simply means new (Xin) and China (Hua), and there is no copyright associated with it. Zheng said there is no need to get permission from Xinhua News Agency to use the name, it is only Xinhuashe which is copyright, with the "she" meaning agency.
A company search in Hong Kong revealed the shareholders in Xinhua Holdings are the managing director, Hong Kong resident Zhou An with a 49% stake and another Hong Kong resident Zhang Gaoliang with a 51% stake. Total paid up share capital is HK$100,000 ($12,820).
As New Tel claims to have conducted full due diligence before entering into any agreements, its management ought be aware of the real status of Xinhua Holdings Ltd. However, as recently as last week, the company issued a press release headlined "Aussie Company in Giant China Deal". The release quoted New Tel chief executive Peter Malone stating "in association with a commercial arm of China's Xinhua News Agency" New Tel executed agreements to develop a Chinese ISP, content provider and Chinese/English language portal.
"With Xinhua we will be in a position to provide the world internet access to a vast storehouse of PRC statistical information including China's statistical yearbook, monthly statistics, economic industry handbook, foreign economic statistics and CD-ROM databases on PRC enterprises " Malone said.
ComputerWire put this scenario to China's Ministry of Information Industry, the regulator of the internet and telecoms in China. The Ministry's official spokesman said: "I have never heard about government websites being handled by the Xinhua Holdings Ltd and New Tel. That's just impossible for such things to happen in China. Each government website is managed by its own department".
We also contacted the Ministry of Foreign Trade and Economic Co-operation, the body in charge of all China's overseas trade including trade statistics. Last year in its initial announcements on China, New Tel had claimed it would be working with MOFTEC web sites.
Xiang Feng, director of the Government Network Department of the MOFTEC said: "It's completely impossible for the MOFTEC to hand over websites to other companies. MOFTEC has our own tech company to provide the technical support. It's just impossible for a Chinese government's website to be handed over and managed like that. How could a company own or have the government's websites? That's just not the Chinese way. I never heard about Xinhua Holdings and New Tel. I can say definitely the MOFTEC will not hand over our website".
Malone went on to say New Tel has signed "three key agreements which gave New Tel the rights to technical and other services to a number of Chinese internet businesses".
However only one of the agreements is with a company in mainland China, Shenzhen Xinhua Network Technology Development Company Ltd, and that company is 90% owned by Zhou An, the managing director and one of the two shareholders in Xinhua Holdings Company in Hong Kong. Zhou An is also a director of New Tel.
It is worth noting that Hong Kong, under the "one country, two systems" agreement between China and the UK, operates as a separate legal and economic entity to China, and Hong Kong firms are regarded as foreign, and treated in the same way as other foreign firms.
A second agreement involves the purchase of Hong Kong-based Xinhua Internet Company Ltd for 120 million New Tel shares. The company was only registered in June this year and has a paid up share capital of HKD10,000 ($1,280). The directors and shareholders are Xinhau Holdings Companys Ltd's Zhou An and Netway.com Inc.
The third agreement involves the purchase for $24m of another Hong Kong-based company, China Internet Technologies Limited. The company was only registered in May this year and also has a paid up share capital of HKD10,000. There is another corporate director, Cyber.net Global Ltd, and a Fu Jian Ying. Shareholders are Cyber.net Global Ltd, Smart Secretarial Ltd and Smart Registrations Ltd.
Very small print in a 34-page document submitted to the company announcements office of the Australian Stock Exchange (ASX), together with a one page announcement similar to the press release acknowledges some of the dangers inherent in New Tel's plans.
It acknowledges that four of five internet joint ventures in China between Shenzhen Xinhua and Chinese government departments or Chinese companies have not been incorporated or obtained licenses. It also acknowledges that the proposed Chinese-language portal, one of the cornerstones of New Tel's China internet policy, will be located in Hong Kong and "may be blocked by the PRC government at the international gateway and denied connection to the PRC domestic internet network."
An Australian Financial Review article dated November 15 and published on the New Tel website goes even further in claiming a link between Xinhuashe and New Tel. "New Tel is also likely to announce the finalization of documents that would see it place 49% of the company with the Chinese-government-owned Xinhua News Agency. In return Xinhua would hand over 18 Chinese websites and several internet service providers to New Tel" the article said. While this statement is not directly attributed to New Tel executives, its appearance on the company's own web site suggests that the company is happy with the content.
Both in the small print of New Tel's submission to ASX, and elsewhere, New Tel makes note of the State Council, China's inner cabinet and top policy making body, having made special exceptions allowing foreign investment in the internet in China before WTO membership will gradually open the sector up.
Much larger charts and diagrams in the small-print document, with the text easily readable, show the structures of joint ventures in China with Shenzhen Xinhua on one side and a tree leading down from the State Council via a ministry to a government department on the other. ComputerWire was able to talk to officials at both of the government agencies involved.
Zeng Dehua, director of the Network Section at the Educational Management Information Center was very surprised to be called and reluctant to talk. However he said: "What I can tell you is that we did set up a company named Beijing Netclub with the Shenzhen Xinhua Network company in September. It is Shenzhen Xinhua Network we dealt with. Shenzhen Xinhua Network claimed it is a branch company of Xinhua Holdings Ltd which is a subsidiary company of the Hong Kong Xinhua News Agency".
He gave us a mobile phone number for Ju Jiang at Shenzhen Xinhua Network. A very rude Ju said: "Who knows what your purpose is asking information about our company. I can tell you that Xinhua Holdings is a subsidiary company of the Hong Kong Xinhua News Agency. I won't tell you who are our Chinese partners. You go and find out by yourself".
At the other government agency, the China Statistics Information Consulting Center (CSICC), we spoke to Chen Dewang, general manager of Kai Kang Da Information Consulting Company Ltd. New Tel claims Kai Kang Da, which was set up in 1993 as a unit of CSICC, will become a 50:50 joint venture between Shenzhen Xinhua Network and CSICC.
Chen said: "I am eager to know what is happening. We are setting a joint venture with the Xinhua Network company but we don't know much about New Tel except that it is listed on the Nasdaq and Australian stock markets. Our cooperation with the Xinhua Network is still continuing, but it is becoming more and more complicated. The general manager's office of the Xinhua News Agency came to our company to investigate the cooperation just recently. It's really becoming more and more complicated. I am really eager to know what's happening."
Despite numerous phone calls and an e-mailed list of questions, nobody at New Tel was available for comment. |
