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China Netcom, the country’s second-largest fixed-line operator, said on Tuesday it had no plans to change its 20 per cent holding in PCCW, the Hong Kong telephone company controlled by Richard Li.

State-controlled Netcom was set to emerge as PCCW’s leading shareholder under a deal that would have seen Richard Li’s father, tycoon Li Ka-shing, team with Spain’s Telefónica and others to pay $1.2bn for the younger Li’s controlling 23 per cent stake in PCCW.

The collapse last week of that deal, which would have seen Richard Li’s stake divided among consortium members, has raised questions over Netcom’s future interest in PCCW. Particularly as Netcom and mainland bureaucrats both objected to attempts by overseas private equity groups to buy PCCW’s assets and Richard Li is thought to have angered Beijing during the sales process.

However, Zuo Xunsheng, chief executive of Netcom, said on Tuesday that the company was happy to remain PCCW’s second-largest shareholder.

“We are PCCW’s second-largest shareholder. We have no plans to change that and we will continue with our responsibility as a shareholder,” Mr Zuo said yesterday on the sidelines of a telecommunications convention in Hong Kong.

The Netcom CEO declined to comment on his company’s relationship with PCCW or Richard Li.

The younger Li originally attempted to exit PCCW earlier this year by entering negotiations to sell its core assets for $7bn to either Australia’s Macquarie Bank or Texas Pacific Group, the US buy-out firm.

The Financial Times revealed last month that both offers were blocked by senior Chinese officials on nationalistic grounds while Netcom had said it wanted PCCW to be run by “Hong Kong people”.

The blocking of those offers saw the emergence of a consortium led by Francis Leung, a prominent investment banker with close ties to Li Ka-shing.

The proposed buyers included Telefónica, which is in the process of raising its stake in Netcom from 5 per cent to 9.9 per cent. Under the proposed structure Telefónica would have bought 8 per cent of PCCW and merged its stake with Netcom’s 20 per cent holding in a special purpose vehicle to be managed jointly. The arrangement would have allowed Netcom to sit atop PCCW’s share register.

The proposal, however, was last week rejected by minority shareholders in a Singapore-listed holding company which houses the bulk of Richard Li’s holding in PCCW. According to stock exchange filings, Richard Li spent HK$198m (US$25m) to increase his stake in PCCW from 26.38 per cent to 26.99 per cent last Friday, a day after the vote by minority shareholders.

Copyright The Financial Times Limited 2017. All rights reserved.
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