PCCW Scraps Sale of Stake, Blames `Market Downturn'

By Mark Lee

Oct. 12 (Bloomberg) -- PCCW Ltd., Hong Kong's biggest phone company, scrapped a plan to sell up to 45 percent of its main unit, saying the ``market downturn'' was to blame for low bids.

Offers for the stake in HKT Group Holdings Ltd. ``were not sufficiently attractive,'' PCCW said in a statement to Hong Kong's stock exchange today. Directors unanimously agreed to cancel the proposed sale, the company said.

PCCW joins Chinese companies Huawei Technologies Co. and Ping An Insurance Co. in cancelling transactions as the worst financial crisis since the 1930s weighs on equity values and pushes up borrowing costs. PCCW was seeking $1 billion to $1.5 billion from the sale, according to Ho.

``It's getting more difficult for buyers to get funding in the current market conditions,'' Kelvin Ho, an analyst at Nomura International Ltd. in Hong Kong, said before the announcement.

PCCW shares tumbled 9.7 percent to HK$2.80 in Hong Kong on Oct. 10, extending their decline to 40 percent this year, compared with a 47 percent loss for the Hang Seng Index.

``The drop in PCCW stock has factored in the likelihood that a sale won't be completed,'' said Ho, who rates the shares ``buy.''


TPG Inc., Providence Equity Partners Inc., Macquarie Group Ltd., Apax Partners Inc., Bain Capital LLC and MBK Partners Ltd., were shortlisted to bid, according to three people involved in the matter. Those companies were seeking to borrow $400 million to $600 million for the purchase, the people said.

Investing Overseas

PCCW, which hired UBS AG for the sale, had planned to use the proceeds to invest in telecommunications businesses overseas to bolster earnings after first-half profit declined 20 percent.

The Hong Kong company was part of a group that won one of three fixed-line licenses in Saudi Arabia in February and is interested in opportunities in the Middle East, China and Asia, Managing Director Alex Arena said in May.

The phone carrier failed to bring in new investors even after pledging to grant buyers preferential access to the unit's dividends between 2009 and 2013.

Nomura's Ho values HKT Group at $7.5 billion, including about $5 billion of debt.

Last year, PCCW derived HK$20.5 billion ($2.6 billion), or 86 percent of its sales, from businesses that will be placed in HKT Group, a sale document said in June. The unit will control PCCW's main telecommunications operations, including its fixed- line, broadband and pay-television divisions.

Huawei, China's biggest phone-equipment maker, last week shelved plans to sell a stake in its mobile-phone unit to buyout firms, citing market conditions. Ping An, China's second-biggest insurer, said on Oct. 2 that it won't proceed with a plan to buy half of the wealth management unit of Belgian lender Fortis.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net