HK telecommunications carrier PCCW: Wrong connections
Euromoney, is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

HK telecommunications carrier PCCW: Wrong connections

PCCW is now controlled by Francis Leung. But that’s not the full story.

Minority shareholders in Hong Kong telecommunications carrier PCCW must be wondering what is going on at their company. In a blur of activity in June, two separate private equity buyers, Macquarie Bank and Texas Pacific Group, emerged to battle for control of the company’s key telecom and media assets.

A contested auction for the company’s prize assets should have been just the tonic for PCCW’s long-suffering shareholders. After all, they have watched helplessly as management has destroyed more than three-quarters of their shares’ value since the acquisition of Hongkong Telecom in July 1999, with the stock underperforming the Hang Seng index by 130% [see chart].

Transfer of control

Sadly, it seems that they are to be denied the chance to maximize value from their disappointing investment. In July, with Macquarie and TPG heads down poring over PCCW’s figures, chairman Richard Li signed a deal to sell a 22.66% stake in PCCW held by his Singapore-listed holding company, Pacific Century Regional Developments (PCRD), to Hong Kong investment banker Francis Leung for HK$9.2 billion (US$1.2 billion) effectively transferring control of PCCW to Leung.

How to undermine an outperformer
PCCW versus the Hang Seng index
Source: Bloomberg

Although the deal does not preclude the eventual sale of PCCW’s underlying assets to a private equity firm, the politics behind the move suggest that any eventual divestment by PCCW of its core assets will be carefully controlled by Beijing.

Gift this article