PCCW Stock Crash

2 key things abt the PCCW - the cyberport project as well as the bidding for the HKT project. Alot of investors got hurt when the price dropped significantly.

RLI dropped out of Stanford shortly before graduation, he joined some financial company to learn deal making and was for a while trying things out in Canada, but was persuaded to join Hutchinson-Whampoa during which he started a number of initiatives. The best known being the establishment of a satellite TV company, a loan from the father, which was sold to the Murdoch group (profit US$400M); 6x return on a 3yr horizon. However, he soon launched out on his own, buying a small Singapore finance company, renaming it Pacific Century Regional Development and injecting some of his HK based high tech operations into it, so that PCRD became their holding company.

In 1999 the HK government initiated the Cyberport project, basically a business park specially designed to support high tech operations, and in early 2000 awarded it to Li's Pacific Century Cyber Works company without going through the full competitive bidding process, which aroused some criticism. This is a 2bn, 240k sqm venture.. but PCCW was allowed to build the project on prime RE without competitive tender.

This was overshadowed when PCCW bot over HKT in Aug 2000, sidestepping Singtel in the process. The bought over was financed by a package of USD11bn in debt and PCCW shares. It enticed investors with some high tech schemes that PCCW will be able to implement once in control. However, with the dot-com crash, stocks dropped from S$4 to 20c at one point. PCCW was the worst performing blue chip on HKSE on 2002 and 2003from intense local telco competition and a struggling international JV Reach with Telstra. In 2003, C&W cashed out of its 14.7% stake in PCCW, taking out USD1.9bn instead of the USD5bn worth in 2000. PCCW purported to hv launched a STG2bn bid for C&W but got rebuffed in feb 2003. RLI gave up CEO in jul 03 but remained chairman. Jack So left MTRC to run PCCW.

For a number of years PCCW diligently worked to reduce its debt burden, including inviting China Netcom to purchase a 20% share holding at HK$5.90 per share, well above the then market price (for US1bn capital injection). This brought hope that PCCW would be able to actively expand its business in China. A saving grace was an early bet on IPTV .

RLI tried to sell PCCW in 2006 to potential buyers like Macqaurie and TPG. But got rejected. After the apparent China veto, Leung stepped on to the scene to buy the 23% stake for $1.2 billion in a shadowy deal that sent the company's stock plunging. Leung will borrow 70% of the acquisition price from PRCD, company 75% owned by the younger Li, and no explaination of the source of the remaining 30%. RLI will still hold on 3% of the company and walk away with USD991mm after resigning as chairman.

In 2008, Li’s PCRD and the China Unicom-China Netcom Group are proposing to buy out other shareholders of PCCW for US$1.9 billion, or at a 45% premium to its last traded price. Li and PCRD, and China Netcom currently own 28.5% and 19.5% of PCCW respectively. The deal is structured in such a way that China Netcom would increase its stake in PCCW to 33% and PCRD and Li’s to 67%. For one thing, there is more to the deal than meets the eye. PCCW will pay Netcom and Li/PCRD US$2.3 billion in dividends immediately after the buyout, which is expected to cost them US$1.9 billion upon completion. In other words, the reason the two major shareholders are able to do a deal like this in the midst of a severe global credit crunch is that they are actually getting paid to do it. For their part, Li and Netcom say they would be taking over a hugely indebted group — PCCW’s net debts will rise to US$4.7 billion after it pays out the dividends. But investment bankers are already being sounded out for a separate listing of PCCW’s telecom assets within 18 months of the holding company’s privatisation.

PCCW is the leading internt service provider in HK using the Netvigator brand for dialup modem and DSL service.

http://blog.360.yahoo.com/blog-XIIfDzQobqO5oCYM9UTvZzgKHH4Org--?cq=1&p=285
http://en.wikipedia.org/wiki/PCCW