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PCCW admits C&W advances
By Alex Frew McMillan
HONG KONG, China (CNN) -- Telecom company PCCW confirmed it had approached British industry peer Cable & Wireless to begin takeover talks but was turned back. PCCW, Hong Kong's dominant fixed-line carrier, initially denied that it had made a bid for Cable & Wireless (C&W). But late on Thursday, the company confirmed it had tried to initiate discussions about buying the company in December. The company never made a formal offer because discussions never got that far. Some of the directors of C&W, Britain's second-biggest telecom, expressed interest in the deal. But it was snuffed out by C&W's newly appointed chairman, Richard Lapthorne. "PCCW will continue to monitor developments in relation to C&W but emphasizes that no decision has been made whether to make any further approach," the company stated. The Hong Kong stock exchange has asked PCCW to explain the apparent conflict in its public statements over the C&W talks. A possible $3.95 billion bidPCCW is thought to have been considering a bid of £2.4 billion ($3.95 billion). C&W has seen its market capitalization plunge from £37 billion in early 2000 to around £1.5 billion now, as its stock slumped 95 percent. Debt-laden PCCW has also been troubled by the telecom slump. It has initiated a series of cost cutting and restructuring measures to turn itself around. The company, run by its billionaire chairman, Richard Li, has laid off more than 20 percent of its work force and in November shifted 3,000 workers to a subsidiary. (Full story) Struggling to turn aroundThe company burst onto Hong Kong's investment scene as the darling of the Internet bubble. It bought C&W's Hong Kong phone operations for $28.5 billion in 2001 at the height of the telecom boom, using its highly priced stock. But since the dotcom implosion, it has focused almost exclusively on its fixed-line telecom business to keep it afloat. C&W still owns 14 percent of PCCW as a result of the deal. But PCCW's shares have been depressed so far this year by speculation that C&W would sell its shares. There is speculation that PCCW leaked word of the deal to put pressure on C&W's board. But is unclear whether the two sides will continue discussions. PCCW shares closed down 1.65 percent at HK$5.95 on Friday, despite a 0.27 percent rise in the benchmark Hang Seng index.
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