Cable & Wireless' (C&W) decision to sell down its stake in C&W HKT was not well received by the market. The group's shares sank in London but recovered to close 2.22 per cent lower on the news and many analysts questioned the value of the deal. What is at issue is not the wisdom of the decision to sell down HKT - despite the fact that it has delivered more than half the group's overall operating profits - but the decision to sell to Pacific Century CyberWorks. 'We totally back the move to sell off Hongkong Telecom,' said one analyst. 'Where we take umbrage is that they chose an Internet start-up, in which they will now take a stake themselves, whose earnings are unproven, and whose management is untested.' Analysts say they are prepared to see C&W's profit-and-loss account take a major hit - with its 12-month profits estimated to be between 25 per cent and 33 per cent lower than the previous year. 'What's disappointing is that it looks like they will take a third cash and two-thirds shares in CyberWorks,' said Nigel Hawkins, utilities analyst at Williams de Broe. 'CyberWorks is very new and the jury is still out on it.' C&W chief executive Graham Wallace dismissed the criticism and pointed out the transaction would give the group at least GBP5 billion (HK$61.84 billion) in cash between 11.2 and 20.9 per cent of CyberWorks. But even Mr Wallace conceded that C&W might not hold its CyberWorks shares beyond a 12-month sale restriction - raising questions about what value C&W puts on CyberWorks paper. 'Time will tell . . . what we will do with that holding. We will decide over time,' he said. However, he does not believe that by selling its HKT holding it has turned its back on the mainland, still widely regarded as holding the greatest future promise for all telecommunications companies. 'This is a further step in the transformation of Cable & Wireless to continually focus on the high growth market of business customers and data and IP [Internet protocol],' he said of the HKT transaction. 'We are already in Europe, the US and Japan, and in the future it will be China.' He reasons that once the mainland decides to embrace the Internet it will seek the services of companies that are at the forefront of building the infrastructure, and providing complex value-added services. Such a strategy he stresses will take time, given Beijing's long-term approach to the development of its telecoms market. In the short-term, analysts say, the disposal makes perfect sense within the framework of C&W's strategy. 'When you look at their global operations, they have 100 per cent ownership of businesses in the US, UK and Japan, which make up 80 per cent of the Internet market,' said Tressan MacCarthy of Credit Lyonnais. 'Hong Kong represents 0.6 per cent and Australia perhaps 2 per cent, and if they get out of Hong Kong and Australia, it goes down from 82.6 per cent to 80 per cent - I am not unduly worried about that.'