Cable & Wireless talk up sale of HK Telecom

LONDON - Cable & Wireless has dismissed fears that the sale of Hongkong Telecom to Pacific Century CyberWorks could falter.

It says that, once complete, the deal will leave it with a 4 billion ($13 billion) cash pile to expand its rapidly growing internet and data businesses.

Chief executive Graham Wallace said he was absolutely confident that the independent directors of HKT would back the cash and shares deal with Richard Li's PCCW.

The recent fall in internet stocks has reduced the value of the offer by 25 per cent to $US27 billion ($59.66 billion), valuing Cable & Wireless' 54 per cent stake in HKT at $US14.6 billion.

Mr Wallace rejected suggestions that Singapore Telecom could come back with a rival bid, saying the deal with PCCW was by far the best offer. He said the sale of HKT remained on course to be completed by August.

He made his comments as C&W reported a smaller-than-expected fall in underlying profits last year and outlined ambitious growth plans for its new unified internet and data business, Cable & Wireless Global.

The new business will be launched next month once the sale of C&W's residential cable interests to NTL is complete. It will have sales of 3.5 billion and C&W is planning to invest 2.3 billion to roll out a range of corporate internet products.

The global business is forecast to boost revenues 15 to 20 per cent a year and earnings before interest, tax, depreciation and amortisation at 15 to 25 per cent within three years.

The sale of HKT will complete a disposal programme that has raised 19 billion and swollen shareholders' funds to 22 billion. As well as HKT, the group has sold its half-stake in the mobile operator One2One, its global marine business and its stake in the French telecoms business Bouygues.

"This gives us the firepower to invest aggressively from our own resources and move quickly when the opportunity arises," Mr Wallace said.

The new global division will take in C&W's business internet and data services in the US, Europe and Japan, which will become the group's Asian hub once the Hong Kong deal is complete. Although the UK will be the biggest single revenue contributor with sales of 1.9 billion, the fastest growth will be in mainland Europe where C&W expects annual sales, at present just 113 million, to increase by 60 per cent a year.

Underlying pre-tax profits before exceptional items fell 24 per cent to 1.12 billion, due to a slump in earnings at HKT as the Hong Kong market opened to increased competition.

Reported pre-tax profits, including 3.8 billion of exceptional gains and 1.5 billion of write-downs, rose 121 per cent to 4.02 billion.

- INDEPENDENT