PACIFIC CENTURY CYBERWORKS.......
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Financial Gateway to Asia
Issue No. 174, July 31, 2000
PACIFIC CENTURY CYBERWORKS
Pacific Century CyberWorks gained 4.1% last week even as the Nasdaq tanked 10.5%. Imagine what it'll do in a good week?!
We have been urging you not to sell your shares in Pacific
Century CyberWorks (1186 - Hong Kong; PCCLF - U.S. OTC) for
what now seems like an eternity.
Unlike all the naysayers who poured scorn on the company for months on end as it sought to close the deal to acquire Cable & Wireless HKT (8 - Hong Kong; HKT - NYSE), we believed from the outset that the deal made perfect sense for all parties concerned. PCCW, Cable & Wireless, C&W HKT, the Hong Kong public, and the governments of both the Hong Kong SAR and (behind the scenes) the People's Republic of China, all stand to get something out of this merger.
Well, now that the full legal ratification of the merger is
just 24 hours away, the doomsayers seem to have gone suddenly silent. Even the most stubborn pessimists appear willing to at least give Richard Li and the joint management team of the merged entity a chance to prove that they can create real value for shareholders out of this mega-merger.
We believe this honeymoon period, which is likely to last
several months, will set the scene for another strong rally in this stock.
4 reasons why Pacific Century CyberWorks' stock price is
poised to re-ignite
1)Sheer weight of money chasing shares in the company.
Following the impending legal ratification of the scheme of
agreement for Pacific Century CyberWorks to acquire Cable &
Wireless Hong Kong Telecom, the merged entity, Cyberworks HKT (??? -- the name has not yet been revealed) will be the
world's third-largest Internet company by market capitalization after Yahoo! and AOL - weighing in at almost
US$50 bn.
That makes CyberWorks-HKT a must-own proposition for fund
managers and individual investors alike, if they want exposure to the Internet in the whole Asian region in one easy-to-invest-in package that comprises about 8% of the benchmark Hang Seng Index in Hong Kong.
The weight of the money flow alone, as the big institutional investors jockey for position, should help put upward pressure on PCCW's stock price. And the effect will be all the more pronounced given that CyberWorks will not be issuing swathes of new stock in future like it did when it was in its hyper-growth phase amid the Internet frenzy in late 1999 and earlier this year. The smaller likelihood of future ownership dilution is viewed as a huge positive by the big institutional buyers.
We've already been seeing heavy trade in CyberWorks' shares
ahead of its Hang Seng Index inclusion (set for August 2), as well as in its warrants -- a type of security that entitles a holder to buy a proportionate amount of common shares at a pre-determined strike price in the future. In fact, trading in CyberWorks' 13 active warrants sometimes reaches nearly 20% of the entire Hong Kong market volume. (Many institutional investors use these derivatives to adjust their exposure).
Just recently, 3 investment banks successfully sold 6-month
covered warrants (meaning they already have the shares on hand to deliver against the warrants and no new shares will be issued to warrant holders should the warrants finish in the money) with an exercise price ranging from HK$19.48 to HK$19.61 per share. In other words, people out there are willing to buy PCCW shares for nearly 20% more than the current price of HK$16.35 after six months.
2)A new wave of bullish reports from the major investment
banks.
We have just seen two leading brokerage houses come out with extremely positive comments on PCCW. Lehman Brothers has set a near-term target of HK$22 for the stock, while Prudential-Bache (traditionally a more conservative investment house) slapped a HK$24 per share fair value on the company.
These bullish reports preceded CyberWorks' inclusion in the
Hang Seng Index. We think more brokerages will follow suit in the coming weeks.
3)Its operations are about to become a lot more pervasive and high profile.
Henceforth, PCCW will not just have a visionary concept, but actual products and services. This will give the company a more recognizable face among investors. And, in much the same way that a lot of people began investing in AOL and other U.S. Internet stocks when they began using their services, we expect a whole new wave of investor-interest in CyberWorks to stem from this.
The acquisition of HKT gives CyberWorks access to Hong Kong's biggest cable infrastructure, which covers nearly all households in the territory. CyberWorks will also immediately have access to a captive market consisting of HKT's 3.3 million existing fixed line telephony subscribers, 1 million wireless customers, 561,000 Internet users, 90,000 Interactive television subscribers and 77,000 broadband service customers.
Already, CyberWorks has made significant headway, signing
strategic agreements in the 2 biggest potential markets for
its interactive broadband service, China and India. In China, it has an agreement with Legend Holdings (another FGA company) to distribute content from its NOW channel, bundled along with Legend's PCs and Internet appliances. In India, meanwhile, CyberWorks has established a foothold by acquiring a stake in a local ISP.
But probably the most notable investment made by CyberWorks in the past few months was its 16% purchase of Tomen Mediacom, a subsidiary of Tomen Corp. in Japan, for US$13.7 mn on July 27. That investment established CyberWorks' presence smack-bang in the middle of Japan's cable TV industry, from where it will launch its NOW service in Asia's biggest existing Internet market.
Tomen Mediacom is Japan's second-largest Multiple System
Operator (MSO) next to Titus-Jupiter, and holds equity stakes in several leading CATV operators in the greater Tokyo area. Helped by the cash infusion from CyberWorks, Tomen Mediacom will soon expand its network to cover nearly 2 million homes within its service area -- and give CyberWorks immediate access to these homes.
4)Asset spin-offs, which will create a whole new
dimension of shareholder value.
Richard Li, the consummate deal-maker, and his aides have
already laid the groundwork for a series of high-profile spin-offs from the merged CyberWorks-HKT entity.
As we've reported before, CyberWorks has hammered out a deal under which HKT's wireless and IP-based infrastructure, spread throughout the Asia-Pacific region, will be combined with the regional assets of Australia's Telstra to create two separate, dominant companies in the fields of Internet backbone and mobile communications. Telstra will also be putting in cash of US$3 bn into these 2 joint venture companies.
The plan is for the two new companies to then be spun-off and listed separately on the Hong Kong Stock Exchange, and
probably on the NASDAQ too. The capital CyberWorks raises
from this will then be put to work to pay down debt, and to
fund the distribution of its Network of the World (NOW) in
Asia.
Given that there are at least 4 good reasons for CyberWorks' stock price to see a new run, it is perhaps worth noting again that CyberWorks is the kind of stock that, when it gets started, is very hard to stop from climbing. That's because, the higher its share price, the better a position the company is in for making deals and funding its expansion using its own stock as a powerful currency.
Keep your CyberWorks shares.
Pacific Century CyberWorks - Cable & Wireless HKT Merger
FROM: PACIFIC CENTURY CYBERWORKS WEBSITE.
The sum of Pacific Century CyberWorks's and Cable & Wireless HKT's market capitalizations -- based on their closing share prices on 25 July 2000 -- of US$49.3 billion would make the Combined Group the world's third-largest Internet company.
* The Combined Group will be a key player in the global satellite, telephony, Internet and multimedia industries.
* Pacific Century CyberWorks operates NOW (Network of the World), the world's first fully-converged TV-and-satellite Internet service, with a potential reach of more than 135 million cable television households under the AsiaSat3 footprint.
* The Combined Group will serve more than 3.3 million fixed line telephony customers, one million wireless customers, 561,000 Internet users, 90,000 interactive television users and 77,000 broadband customers.
* Cable & Wireless HKT has among the highest revenue per employee of any telecom company in the world; more fixed and mobile customers per employee than nearly any other global telecom company; and among the lowest operating expenses per customer of any telecom company world-wide.
* Through its partnership with Telstra, the Combined Group will be the second-largest IP backbone company in the Asia-Pacific region, with a combined international capacity of more than 1.2 Gbps of Internet connectivity, and the world's third-largest, with combined international voice traffic (Australia and Hong Kong) of over 5 billion minutes.
* The Combined Group will develop and expand its operations along eight lines of business:
* Broadband Business-to-Business
* Broadband Business-to-Consumers
* Data centers/Web hosting
* IP Backbone/Satellite
* Mobile
* Fixed network services
* CyberWorks Ventures
* Cyberport & other infrastructure-related businesses
* As of 31 March 2000, the sum of Pacific Century CyberWorks's and Cable & Wireless HKT's pro forma assets amounted to HK$74.34 (US$9.6 billion).
* Both Pacific Century CyberWorks and Cable & Wireless HKT are constituents of the MSCI Hong Kong Index and the MSCI Far East (ex-Japan) Index. The Combined Group will take the place of Cable & Wireless HKT on the benchmark Hang Seng Index after the merger.
The Financial Times reported that Pacific Century CyberWorks, Cable & Wireless HKT and Telstra of Australia are in the final stages of forming an alliance.
Financial advisors from each party are checking valuations with emphasis on the mobile phone units.
Progress is being made at a satisfactory pace according to Telstra.
(End)
PCCW-HKT May Use Stock Code "8" for HK$1 Mln
Aug 02,2000 - 18:20:55 HKT [Quote] [Datacards] [Chart] (1186)
The Stock Exchange of Hong Kong announced a new stock code procedure which allows listed companies making a
takeover or merger offer to choose the stock code for the merged company in return for a HK$1 million donation to the
Community Chest. The new rule took immediate effect.
A listed company making a takeover or merger offer may choose to adopt the stock code of the other company as its own
stock code with effect from withdrawal of listing of the other company, the exchange said.
The Exchange will reserve the chosen stock code for three months. If the takeover or merger does not take place, the
stock code reservation will be cancelled and the Community Chest will refund any donation received in respect of the
stock code.
The new rule is expected to allow Pacific Century CyberWorks Ltd. (1186), Asia's second-largest Internet investment firm,
to use the "8" stock code of Cable & Wireless HKT Ltd. after their merger, which will become effective Aug. 17. The
number "8" phonologically symbolizes "prosperity" in Chinese.
PCCW shares ended up 2.8 percent to HK$16.75. HKT, the city's largest phone company, surged 3.9 percent to
HK$18.50.
By Michael Sainsbury, iTnews
Tuesday, August 01, 2000
Telstra is on the verge of sealing its $6.5 billion alliance with Pacific Century Cyberworks (PCCW).
This follows a decision by a Hong Kong court on Tuesday allowing upstart PCCW's US$26 billion takeover of Cable & Wireless Hong Kong Telecom.
So, after four months of waiting and negotiating, PCCW and Telstra will be able to start cranking up their wide-ranging alliance.
PCCW group MD Alex Arena told iTnews that the combined PCCW/HKT will likely have a new name. He said the new entity will be divided into eight business units, two of which will be the joint ventures with Telstra in a global IP backbone company and a regional mobile company. The plan is for the IP backbone company to be floated as a separate entity within 12 months.
Telstra is also understood be discussing the possibility of extending the alliance to another business unit --- data centres. The other three units will be broadband, business-to-business and fixed line.
C&W HKT shares will trade for the last time on the Hong Kong stock exchange on August 8. The company will then be delisted and the merger will go ahead on August 17.
" We are taking the two companies, PCCW and HKT and disassembling the pieces and reassembling them,” said, Arena in an exclusive interview with iTnews.
“We end up with a structure of business units. Some of these end up being their own stand-alone companies. Then underneath these we will have two horizontal units. One on ventures and one infrastructure (Cyberworks Ventures and Cyberport).
Telstra is understood to be keen to wait until final negotiations with PPCW are complete before any of the alliance's plans are publicly revealed. While Telstra wants to announce as much detail as possible first up, it will not be in a position to do this in time for the company's annual results announcement on August 30.
Arena said that Telstra - when it fully exercises its convertible notes - will have about 2 percent of the new company. Other major shareholders in the new company will be Intel with around 4.5 percent, CMGI with 3.5 percent and the Chinese Government owned China Telecom with 5 percent.
CMGI has 60-70 US Internet investments including AltaVista.
"Because we are doing so much with Telstra for an alignment of interests we have them in the top company, " Arena said.
Regarding the IP backbone company, Arena said: "We have about 24 POPs around the world. We will do that 50/50 with Telstra and build that out and make it an even bigger global player. In Asia we are pretty comfortable that this will be number one in terms of capacity and traffic. The only other significant players are NTT, KDD and SingTel. HKT and Telstra are number two and three in the region. In the announcement we made we said we would keep the option open about bringing in other partners. Our position has always been that this is a global play."
HKT deal clears last hurdle in fast-track decision
JANE MOIR
--------------------------------------------------
The merger between Pacific Century CyberWorks and Cable & Wireless HKT cleared the final hurdle yesterday when a judge sanctioned the multi-million dollar deal.
Mr Justice Michael Hartmann gave oral consent to the scheme of arrangement which is now expected to take effect on August 17. He will give reasons in writing later.
Realising that "very large sums of money are hanging in the balance", he said there was no reason why an order could not be made immediately.
CyberWorks chairman Richard Li Tzar-kai yesterday promised "extraordinary" growth in customer service capacity, "explosive" growth for shareholders and "unprecedented" growth for staff.
"Today marks the beginning of a new era - an era that will be good for Hong Kong, Asia and the global new economy in which we will now be better able to operate as a major player," he said.
Mr Li said in coming weeks the company would unveil a "new aggressive and focused corporate structure" called "eight by three", merging eight business units into three operating sectors.
Speculation has suggested those sectors will be fixed network services, high-speed broadband and Internet. Mobile services will come under a joint venture to be created with Australia's Telstra.
"The new company created by today's decision essentially adds sparks to the tried and true," Mr Li said.
The merger is Asia's largest-ever outside Japan, with an aggregate market capitalisation of HK$393 billion, the Court of First Instance heard yesterday.
It involves a cash consideration payment of US$11.32 billion. Under the scheme, all Cable & Wireless HKT shares will be cancelled and the company will become a wholly owned subsidiary of CyberWorks.
HKT shares will be suspended from trading on August 9 and de-listed on August 17.
The judge was informed that it was very unlikely the combined entity would pay dividends to shareholders in the foreseeable future, as its risk profile would change dramatically as the company shifts focus.
Barrister David Richards explained: "The merger will accelerate the change in direction of the business." He also told the judge of Cable & Wireless (Far East)'s intention to carry out a placement of up to 4.9 per cent of CyberWorks' enlarged share capital before November 15.
"Cable & Wireless has agreed to retain its remaining holding for a period," he said. Initially, this would be for six months. A further 50 per cent of its holding will be retained for a further six months.
There was no opposition to the merger in court bar an anonymous fax which had been sent to the companies. Mr Richards said the letter contained material which was "plainly scandalous".
The fax was dismissed by the judge.
An extraordinary meeting on July 3 saw 97.36 per cent of shareholders present voting in favour of the merger
PCCW: 155 Interessenten für Cyberport
Wie PCCW heute berichtete haben sich bereits 155 Unternehmen
für die Nutzung des Cyberports nach dessen Fertigstellung im
Jahre 2007 eingetragen. Darunter 15 international-agierende
Konzerne: Cisco, CMGI, Hewlett-Packard, Hikari Tsushin, Hua
Wei, IBM, Legend, Microsoft, Oracle, Pacific Convergence Corp.,
Portal, Silicon Graphics, Softbank, Sybase and Yahoo. (msp)
© Emerging Markets Research
http://www.em-research.de
First Boston gibt Calls auf PCCW aus
Die Credit Suisse First Boston gibt 300 Millionen
Call-Optionsscheine auf PCCW mit einem Basispreis von 17,745
$HK und einer Laufzeit bis zum 27. März 2001 aus. (msp)
© Emerging Markets Research
http://www.em-research.de