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Meet the Boss
Li shows a calm exterior even as criticism of his company mounts

Inside the PCCW Merger: Can fallen angel Richard Li manage the new PCCW and regain investors' confidence?

Pacific Century CyberWorks chief Richard Li Tzar-kai is a dealmaker in fast-forward — London one day, New York the next, Beijing after that. But back in Hong Kong, he slows. In truth, the reduced pace is forced on Li. He can hardly enter a room or alight from a car without a press posse descending, hungry for a photo or off-the-cuff remark. The tabloids chronicle whom he dates (the university student is no longer in the picture) and what he does with his hair (the buzz cut lives), while the serious journals chart every new venture. Since PCCW launched its $38-billion takeover of dominant Hong Kong telecom services provider HKT last February, the scrutiny has been relentless. In the last seven months, PCCW stock tumbled from a high of HK$26.35 to HK$8.20, and Li's media-image has devolved from brash visionary to embattled, over-matched peddler of high-tech fancy. Is the 33-year-old younger son of legendary magnate Li Ka-shing cracking under the pressure? In two separate 20-minute phone conversations (Li had to break away in between to meet with fellow wunderkind, American computer entrepreneur Michael Dell) on Sept. 27 and in a briefing Li gave half a dozen journalists the following day, Senior Correspondent Alejandro Reyes found him relaxed — cheery, even — and determined to weather the market storm. Excerpts:

Why has PCCW's stock price plummeted?

It's simple. Telecom stocks have come [under pressure]. And there has been a sharp downturn with Internet stocks, so we are hit twice. [Trading] volume has shrunk tremendously. Globally, $1.5 billion worth of [PCCW] stock has come up for sale in a thin market. So we are triple-whacked. There was an overhang [of the stock C&W held in PCCW]. The hedge funds know what to do. You can blame them, but that's how they make money.

One of your deputies, Alex Arena, blamed the depressed stock on the difficulty investors have understanding your business model.
I think that the local press especially doesn't get the significance of the IP [Internet protocal or broadband] backbone business that HKT has. [Taken together] with Telstra, it's the third largest in the world. This IP backbone business was never on any analyst's report even at the time that we bid for [HKT]. It's shocking but it's true.

What about the failed deals, such as the ventures with CMGI and GigaMedia? Critics say that they backed off because you're not an attractive partner anymore.
[Our cooperation with] CMGI will move ahead. With GigaMedia, we never invited them in the first place. We were competing on the same deal — getting into We settled by allowing them to come in as a minority partner. Later, they didn't want to be the minority partner. ERA chose us to be the controlling partner, and we would not compromise in giving up the controlling position.

Are the deals with Telstra in trouble?

We are deep in negotiations and can't tell you anything.

Critics have said that because your Network of the World [NOW] broadband content service is not up to speed and the market climate has soured, the telecom services of dull HKT will have to sustain PCCW. True?
That's technically correct. It has always been [the case]. [HKT] is a cash cow, but it is not where the growth story is.

What about the Network of the World [NOW]?

NOW is completely on track. We have switched [some emphasis] from Asia to the Western world.

But many analysts in the telecom business and in the brokerage firms have questioned whether you can deliver valuable, interesting content on NOW. They've been disappointed.

The audience is not supposed to be the analysts. When our strategy and distribution work out, we will prove it with actual numbers and payments.

Would you sell NOW if a buyer approached with a good offer?
Absolutely not. No plans whatsoever.

You sold STAR after three years. Why should PCCW and NOW be any different? Why should we believe you will stick with them?
There's a big difference. At STAR, we were relying on two funding sources: one, my family, and two, Hutchison. This time it is very different. It is our own company, the management team's and our shareholders' company.

How is the PCCW-HKT integration progressing?

We find a lot of support for the B2C [business-to-consumer] operation. Our concept and our technology and our applications have been cutting edge. But we needed to recruit people. So, all of a sudden this merger provides a tremendous amount of help.

You also have hired international brand advisers. Obviously, they have their work cut out. You're pushing them to complete and launch the new PCCW-HKT brand by November, correct?
It is important. I'm not focusing enough on that. But it is important. Maybe we'll boost [the size of] the team.

Is brand marketing important so that people understand what PCCW does and wants to do?
Branding and the issue of marketing is even more than that. It's not just the brand or advertising. It's follow-up sales, customer service, and rectification of mistakes, all the way to customer retention and feedback to the loop.

You seemed intent on charming your way into HKT, asking people to call you "Richard," for instance.
That was my first real full day [at Hong Kong Telecom Tower]. I was going up and down the elevator and staff whom I've never met addressed me by my first name. That's better than in the old [HKT]. In the old firm, new staff were sometimes reluctant to be open.

But was this informality Richard being himself or being the Richard you calculated you should be?
Just being myself. Look, all these companies we talk about, they are a big deal in Hong Kong and in Asia, but they are not really world-scale. It's about getting down and getting the work done and serving the customer well. A wave of competition is coming and standing on formality and baloney is no way to compete. That's a fact.

At the time the merger went through, you promised to double PCCW's market capitalization. Do you regret that?
Absolutely not. That's what shareholders pay us for. That's why we're receiving a salary and we get to sit at the helm. If we don't do that, we shouldn't be here in the first place.

STAR TV chief James Murdoch recently made some disparaging remarks about you and your strategy, saying that your global approach was wrong. What is your reaction?
I won't comment. We'll wait until someone with a successful business track record makes comments and then we'll respond. We don't find it very mature.

Even after it sold one-quarter of its holdings, Cable & Wireless still owns 15% of your company. What can you do about that overhang of shares?
That we have to deal with. We are openly going out to find a strategic partner, which does not preclude C&W. We would like to find a strategic buyer for those stakes or change the strategic relationship with C&W so they are long-term holders.

Are you stressed by what's happening?
No. In fact I'm on my way to the hospital to see a good friend's mother who just went into the hospital. I still have a life, but it's busy. Do I feel more relaxed now that there is more management, more resources, more control, more funds [after the merger]? Absolutely. Do I feel good about [destroying] shareholders' value? No. Am I jumping out the window? No, I'm not. I'm just plugging away, working as hard as I can.

You seem quite calm. What keeps you up at night? That you might have to give up a diving holiday?
I hope it's not business. I haven't [gone diving] in a while. The PCCW fundamentals are strong. Boy, it makes me feel stronger about the [company to see] all those things that have come together. I'm a much calmer and happier person now than before the takeover when the stock was at HK$26. I can assure you of that.

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