Netcom to buy into PCCW-HKT?

19 May 2004

China’s second largest fixed line operator China Netcom is reported to be in talks to buy a stake in Hong Kong’s largest telco PCCW-HKT. Although no exact details of the discussions have been released, it is believed that the two companies are also exploring the possibility of establishing a number of joint ventures in South East Asia as both look to capitalise on overseas growth opportunities.

Owned by tycoon Richard Li, PCCW-HKT is the biggest fixed line operator in the special autonomous region (SAR) by some margin with some three million lines under its control at the end of 2003. However, its subscriber base and market share have been steadily falling in recent years amid intense competition from Hong Kong’s 35 alternative fixed telecommunications network services (FTNS) licensees, most notably Hutchison Global Telecom, Wharf T&T and New World Telecom. In 2003 PCCW-HKT’s fixed line service revenues fell by 12% to USD772 million and its share of the market from 82% to 73%.

Netcom meanwhile is looking to establish new revenue streams ahead of its planned overseas IPO later this year through which it hopes to raise between USD1.5 billion and USD2 billion for the ongoing development of its domestic fixed line network. In 2003 Netcom began expanding the ambit of its operations overseas for the first time by joining the Wireless Broadband Alliance alongside Korea Telecom, Maxis Communications, Telstra and Singapore’s StarHub with the aim of promoting WiFi technology across the Asia-Pacific region. It also recently finalised the acquisition of troubled submarine optical network operator Asia Global Crossing for USD270 million. The purchase, the first overseas investment by an operator from the Chinese mainland, gives Netcom access to a number of markets in South East Asia, as well as links to the US and Australia.

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