Why GEM has got its fists up: KS Lo, Asiamoney, June 2000
1 June, 2000Paul Keating, telling it like it should have been: Asiamoney, July 2000
1 July, 2000BOX 1: DEFINING PCCW
So what is PCCW? On May 26, PCCW published its monolithic acquisition proposal – 338 pages long for the English language section alone – which provided considerably more concrete information than had previously been available. The document explained that the merged company would be reorganized in to eight lines of business. They are:
• Broadband business-to-consumer
The proposal says this business will include subsidiary Pacific Convergence Corporation, the Internet and IMS divisions of HKT, and HKT’s own joint venture with Star TV. That joint venture was subsequently abandoned, to nobody’s great surprise: although Allen, Arena and head of corporate communications Joan Wagner all told Asiamoney that there was no overlap between PCCW’s content ventures and the loosely defined JV, the idea of a News Corp-owned company
participating in such a similar business seemed unlikely. Star TV was PCCW chairman Richard Li’s creation and was sold to News Corp, which found itself in potential opposition to PCCW when it spoke of teaming up with Singapore Telecom to put together a rival bid for HKT.
Pacific Convergence Corporation came into being as a 60/40 venture between the Pacific Century Group and Intel in March 1998. It was injected into PCCW in July 1999. It includes all the content parts of the business, chiefly the Network of the World (NOW) service that was launched on June 30 in London.
• Business-to-business
Somewhat vague at the moment; the proposal says that “a key strategic rationale for the Merger is to accelerate the efforts of both companies in this area at this important time in the sector.”
• Data centres/web hosting
PCCW owns 80% of iLink.net with data centres in Central and Shatin, and HKT has six data centres. Regional expansion is planned.
• IP backbone/satellite
This is the main area where Telstra comes in. As part of its strategic alliance, the companies agreed to form a joint venture consisting of their combined IP backbone and satellite businesses; they estimate the combined transmission capacity at 1,200Mbps. “Its stated objective is to develop a global distribution network which will involve the upgrade and rollout of additional cable and other infrastructure to meet the future demand for carriage of voice, data and Internet services.”
• Mobile
At the end of March, HKT’s mobile customer base stood at 958,000; it also holds an indirect 15% interest in Singaporean mobile phone company M1. Telstra is a big part of this business too, at least on the face of it: the two companies plan to form a regional mobile company owning HKT’s wireless businesses and Telstra’s mobile and wireless assets outside Australia. Telstra’s contribution to this is US$1.5 billion.
There is a problem with this plan: Telstra doesn’t own much in the way of ex-Australia mobile assets. It would have done if its planned takeover of Total Access Communications in Thailand had gone through, but it didn’t – the company was trumped by Telenor, amid suggestions that TAC had objected to being taken over by a Chinese company (PCCW would, with a 60% stake, be the majority shareholder – although the proposal points out that it would plan to sell 9.9% to a mutually agreeable third strategic investor). Paul Rizzo, Telstra’s group managing director, finance and administration in Melbourne, tells Asiamoney: “One of the things we now have to consider, given that we were overbid in the Thai opportunity, is whether there is some other asset we will put in, or whether we are prepared to put in cash in lieu, or maybe vary the percentage holdings.”
• CyberWorks Ventures
This is the busy venture capital arm of the business. It will “pursue a strategy of taking synergistic strategic positions which are intended to provide critical technologies expertise, content and commerce to the Combined Group’s service offerings.” Companies that have fitted the bill so far include Sina.com, 3Fusion, iBeam, Equinix and a range of other businesses with visionary ideals and murderous punctuation.
• Fixed network services
Clear enough – local and international telecommunications services.
• Cyberport and other infrastructure-related businesses
A property business, broadly speaking. PCCW controversially was given the mandate to develop the Cyberport site in 1999 by the Hong Kong government despite the lack of a competitive tender; a decision considered inappropriate by some given the high level of residential property on the site. The development will cover 26 hectares in Pok Fu Lam and is designed to attract information technology companies to Hong Kong; 15 multinationals have signed letters of intent to become anchor tenants, among them Cisco, Softbank, IBM and Yahoo! Among other property interests, the most significant is Pacific Century Place in Beijing.
