PCCW mulls spinning off telecoms operations into business trust

21 Mar 2011

Hong Kong-based telecoms, media, IT and property group PCCW is studying a proposal to spin off its telecoms operations and form a listed business trust, which would be the first of its kind in the Special Administrative Region (SAR). The quadruple-play telecoms and pay-TV operator, which is struggling to maintain margins in a highly competitive market, would require a change to the SAR’s listing rules which do not currently allow publicly traded business trusts, according to Reuters. PCCW, chaired by media tycoon Richard Li, is exploring the idea of converting its telecoms division into a trust to allow it to raise cash without relinquishing control to shareholders. Under the business trust model, the trust sells units to investors, but the business is usually controlled by a trustee manager affiliated with the company establishing the trust. The announcement follows Richard Li’s father Li Ka-shing spinning off Hutchison Whampoa’s ports operations as a business trust in Singapore earlier this month.

TeleGeography’s GlobalComms Database records that an attempt by Richard Li and Chinese shareholding partner Unicom to buy out PCCW’s minority shareholders and delist the company was blocked in April 2009 by Hong Kong’s Securities & Futures Commission (SFC) following allegations that voters were improperly influenced by the distribution of shares via certain agencies. In October 2008 PCCW cancelled a plan to sell a 45% stake in its wholly owned subsidiary HKT Group Holdings Limited (HKTGH), the holding company for its core telecoms, media and IT assets, blaming the global credit crunch for a failure to attract bids anywhere near the USD2.5 billion target price. Two earlier proposed sales of PCCW’s shares/assets failed in 2006.

Hong Kong, HKT/PCCW (incl. CSL), PCCW Group