PCCW's restructure

Cynthia Leung/Ovum
02 Jun 2008

PCCW announced on May 29 that it will consolidate its quad-play offering, including fixed line, broadband, internet, TV and mobile, under a new firm called HKT Group Holdings Ltd and seek investors for the acquisition of up to 45% of the new company.

It is two years since the last attempt by Richard Li to sell off the company's assets was blocked by China Netcom. The latest move is believed to have been given a green light from China Netcom, which itself will undergo a restructuring.

Under changes announced by the MII, China Netcom will merge with GSM operator China Unicom, while chairman Zhang Chunjiang will become a vice president at China Mobile. Two years ago, Zhang strongly objected to the proposed sale to overseas investors, due to security concerns about core telecom and media assets falling into foreign hands.

The twist this time is that on sale is a stake of less than 50%, not the 100% as in two years ago, and PCCW keeps the controlling stake.

This has won in-principle approval from Netcom, although at this stage details still need to be assessed, depending on the bidders' background and offering price.

Since 2006, PCCW has been developing its quad-play strategy, bundling of media content and interactive services. Quad-play is part of its successful strategy to reverse the decline in fixed-line access, maintain margins in its core fixed telecoms products and grow its broadband market share.

Despite the official claim that the spin-off was for tax reduction benefits, it is widely speculated that the real intention behind is to facilitate the sale of fixed line assets, which has limited growth, and the possibility of a separate listing of HKT in the future.

Cynthia Leung, Senior Analyst

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