The quickest way to create shareholder value, as every infrastructure operator knows, is to find a keen buyer. The hard way, as Richard Li is about to find out, is going it alone.
Mr Li’s efforts to sell PCCW, Hong Kong’s dominant telecommunications carrier, have fallen apart spectacularly. Two private equity bidders withdrew in the face of political opposition from China. Now minority shareholders at Mr Li’s holding company have voted down a proposal to sell the controlling 23 per cent stake in PCCW to a consortium that included his father, billionaire Li Ka-shing. The vote delivered the outcome Mr Li wanted, but leaves him facing the challenge that drove him into talks with suitors in the first place: how to recoup even a fraction of the value destroyed by the $28bn purchase of Hong Kong Telecom at the height of the internet bubble.
First off, that requires lifting PCCW’s share price to HK$6, in line with the latest offer. PCCW stock closed on Thursday at HK$5.05 and, thanks to the defeated vote, PCCW shareholders will forgo a promised special cash distribution of HK$0.33-HK$0.38. The core fixed-line telecoms business has stabilised but prospects are dull. Internet TV is friskier – subscriber numbers are growing, as are average monthly user revenues – but is not profitable. PCCW recently bought domestic rights for the English Premier League but that will have more impact on subscriber growth than profits.
The big swing factor is mobile. PCCW has traded in Hong Kong’s top mobile operator for one of the minnows, which it is now struggling to develop. Sure, it can pump endless content on to mobile screens and tie in users with bundling programmes. But making money in one of the world’s most competitive markets is tough. PCCW shareholders have sat through one of Hong Kong’s most gripping corporate dramas but only the brave will stay tuned for the next episode.