PCCW aiming at new plan to spin off its assets
A pedestrian walks past a row of PCCW phone booths in Central, Hong Kong. The company plans to form the first listed business trust in the city. Daniel J. Groshong / Bloomberg |
Telecommunications group PCCW Ltd said Monday it is studying a plan to spin off its telecommunications assets and form the first listed business trust in the city.
Hong Kong’s dominant fixed-line operator is “in the preliminary stages of exploring the feasibility of a spin-off and separate listing of its telecommunications business in the form of a listed business trust”, PCCW wrote in a statement to the city’s exchange, adding it has been discussing related regulatory issues with the Securities and Futures Commission (SFC) in Hong Kong.
PCCW shares rose 4.57 percent on Monday after the news, compared with the 1.73 percent gain on the city’s bench market Hang Seng Index.
“This new attempt is very likely to bear fruit this time,” said Alvin Chung, associate director at Prudential Brokerage. “After several past failures, PCCW has eventually sorted out a viable way to split its telecommunications business.”
As early as 2006, Richard Li, PCCW’s chairman had tried to sell his controlling holding in the company to former Citigroup Inc. banker Francis Leung, but the attempt fell out as Li failed to secure minority shareholder approval.
Following several unsuccessful bids to sell its main telecommunications assets in 2006 and 2008, Li scrapped a $2.1 billion deal to take the company private in 2009, after the SFC alleged that hundreds of people in the company were given shares to boost support for the transaction.
Listing as a business trust would allow a company to raise capital without relinquishing control to shareholders as the trustee manager controls the business, which is usually an affiliate of the company establishing the trust.
Although PCCW said in the statement that it was in talks with the city’s regulator on the spin-off plan, Hong Kong’s current listing rules do not allow publicly traded business trusts outside of real-estate trusts.
“It is not clear where the company is going to list the telecommunications assets separately, but regulatory barriers in Hong Kong may drive the company to mull a listing somewhere else,” said Chung.
Last week, the city’s container-terminal operator Hutchison Whampoa Ltd, controlled by Li Ka-shing spun off some of its business – in the form of business trusts in Singapore, where there is a far more liberal regulatory regime for business trusts.
That $5.5 billion initial public offering was the biggest IPO ever undertaken in Singapore, for which some investors in Hong Kong were very critical, saying that the city had lost out due to the lack of a business-trust structure.
Meanwhile, PCCW has lost more than 90 percent of its value since Richard Li – son of tycoon Li Ka-shing – acquired Hong Kong’s dominant phone company in a deal valued at $28 billion in 2000.
Its market value has shrunken to about HK$24.9 billion now, due to the fact that PCCW has been facing fierce competition over the past few years amid a flood of new operators saturating the market.
PCCW’s key rivals in the city, SmarTone Telecommunications Holdings Ltd and Hutchison Telecommunications Hong Kong Holdings Ltd, have both outperformed the city’s benchmark Hang Seng Index this year. They gained 84.14 percent and 9.29 percent in 2010, respectively.
PCCW has fallen 0.29 percent so far this year.
China Daily
(HK Edition 03/22/2011 page2)
http://www.chinadaily.com.cn/hkedition/2011-03/22/content_12205544.htm