It's time for Unicom to buy PCCW

Metaratings
28 Apr 2009
00:00
Article

Richard Li’s attempts to exit Hong Kong’s biggest telco have been as successful as his tenure in running it.

The latest effort was a lamentable one for Hong Kong corporate governance.

Until they were blocked by the Hong Kong Court of Appeal, Li and China Unicom planned to pay $2 billion for the company, helped by a $257 million sweetener from shareholder funds on completion of the deal.

But the fault is not entirely his own.

Li could have sold the company to a private equity group in 2006 for as much as $6 billion if Beijing had not exercised its veto.

Through its 20% shareholder China Netcom (now Unicom), China’s central government’ once more made certain that no foreign investor would play a major role in China’s telecom market.

Since the deal was called off last week, PCCW’s share price has sunk even further. It last traded at HK$3.31, well off the $4.50 offered in the buyout.

This is a mess made in Beijing and only Beijing has the solution, which is for Unicom to acquire Li’s holding.

That would give the mainland’s number two fixed-line carrier a footprint in the business center of Hong Kong and access to expertise it can sell abroad.

It would put PCCW – whose underlying performance as a telco is solid – into the hands of committed owner.

Most of all it would return a few dollars to the long-suffering shareholders and put an end to this dispiriting saga.

Related content