PCCW aims for $1.4b in telecom IPO

Dylan Bushell-Embling
10 Nov 2011

Hong Kong's PCCW expects to raise up to HK$11 billion ($1.41 billion) from the spinoff of its telecom operations into a listed business trust.

PCCW on Tuesday launched its global IPO of 32% of Hong Kong Telecommunications Limited (HKT).

In a filing, the company said it currently expects the indicative price range for to be between HK$4.53 and HK$5.38, but that a final range has not yet been set.

The indicative range would put the size of the global offering at between HK$9.30 billion and HK$11.04 billion, and give the telecom group a total market capitalization of between HK$29.06 billion and HK$34.52 billion.

If the IPO is fully subscribed, PCCW's holding in the HKT would be reduced to 63%, unless it takes the option to make an over-allotment if demand is strong, in which case it would fall to 59.9%.

Li Ka-Shing's PCCW, which also operates a ports business, has revealed plans to use the bulk of the proceeds from the spinoff to pay down debt.

Credit ratings agency Moody's, which has the group on review for a possible downgrade, has commented that the offer, and the plans in place to repay bonds expiring this month, would allow PCCW cut its net debt by around $1.5 billion if the listing proceeds as planned.

Should this happen, Moody's would be likely to confirm PCCW's Baa2 credit rating with a stable outlook, according to vice president Lauren Acres.

“However, should the plans for the business trust structure be aborted or timing be delayed beyond the anticipated closing date of Q4 2011, then Moody's would close the review and most likely downgrade the Baa2 ratings on HKT to Baa3,” she added.

Acres added that with PCCW set to be the principal shareholder in a listed HKT, the former's actions will continue play a role in determining the rating of the latter.

PCCW first announced plans for the spinoff in March. The Hong Kong stock exchange initially rejected the model, but PCCW successfully appealed the decision.

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