CHINA-BACKED CITIC Pacific has decided against bidding for the second Hongkong telephone network, opting to use its partnership with Hongkong Telecommunications to break into China's potential telecommunications market. CITIC Pacific chairman Larry Yung Chi-kin said yesterday the decision was made after a six-month feasibility study. The finding suggests that it would not be financially viable for the group to run a second network after 1995 if it could maintain a substantial holding in Hongkong Telecom. ''Buying a 12 per cent stake [in Hongkong Telecom] at a discount price of $7.80 per share [from CITIC (HK)] is certainly a better deal for the group,'' Mr Yung said. He believed the Hongkong Telecom investment would bring a higher return than CITIC running a network on its own. Mr Yung said the group's initial interest in tendering for the second network was based on the assumption that only one licence would be granted to compete with Hongkong Telecom. However, with the Government deciding to allow more competition, the rules of the game had changed, he added. The fact that the second network operator would be entitled to a lower share ratio between IDD and local services earning than Hongkong Telecom was another reason why CITIC withdrew its interest, he said. He said it was no secret that IDD would remain the main source of income in the future. Mr Yung said CITIC would be committed to assisting Hongkong Telecom in entering the mainland telecommunications market but he denied any knowledge of China's thoughts on the issue. He added: ''Sooner or later China will open up its telecommunication network to overseas investors,'' and it was in this aspect CITIC could help. Mr Yung also talked at length on the latest $7.17 billion placement, defending criticism that CITIC Pacific had failed to move from its image of a passive holding company. By denying the analogy with Jardine Strategic Holdings whose shares were trading at a big discount to net asset value, he said CITIC Pacific was only in the course of becoming an actively investing conglomerate. The latest purchase from the company's parent had added assets worth about $11.3 billion to its portfolio and boosted its market capital above $20 billion. Mr Yung emphasised that the assets injection was beneficial to shareholders by boosting group earnings without any dilution. He said: ''The long-term objective is to limit the passive investment to 30 per cent of the existing portfolio, down from the present level of about 50 per cent.'' Mr Yung denied any plans at this stage for a separate listing of Dah Chong Hong, but did not rule out the possibility after the group expanded further.