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Pacific Century CyberWorks' US$38.1 billion proposed merger with Cable & Wireless HKT has finally got the go-ahead from the telephone operator's board, according to a source.

 HKT's board had voted to support the merger and would recommend shareholders accept CyberWorks' offer, the source said.

 HKT's board met yesterday to discuss the proposed merger before the company announced a 90.06 per cent fall in profit to HK$1.14 billion in the year to March 31.

 HKT chairman Sir Brian Smith said yesterday that directors had reached a unanimous opinion regarding the proposed merger because of 'positive progress in merger discussions with CyberWorks'.

 However, Sir Brian refused to disclose whether the board had endorsed the plan, as it is not allowed to disclose any decisions until after HKT's shareholders are informed of them.

 'You can read between the lines,' HKT chief executive Linus Cheung Wing-lam said.

 'The board's view is very positive, and I am personally delighted about this victory.'  HKT said it would post a 280-page circular to shareholders on or about May 20 that would document the views of the board and those of an independent committee towards the proposed merger.

 After the dispatch of the circular, Britain-based Cable & Wireless (C&W) shareholders will meet on June 13 to vote on the merger, while their HKT counterparts will vote on June 26.

 If shareholders from both companies approved the merger, it could be completed by late July or early August, the source said.

 C&W chief executive Graham Wallace, who is also a member of HKT's board, said the British company was committed to CyberWorks' merger proposal and would not negotiate with any other bidder.

 C&W owns 54 per cent of HKT.

 'C&W has been irrevocably committed to CyberWorks' proposal,' Mr Wallace said.

 Singapore Telecommunications and Australia-based News Corp have been rumoured to be considering a joint offer for HKT.

 The rumours helped to drive down CyberWorks' share price to a low of HK$12.95 recently.

 Yesterday, CyberWorks' shares fell 2.88 per cent to close at HK$15.15, while HKT's dropped 2.15 per cent to HK$18.20.

 Mr Wallace said C&W was not worried about the volatility of CyberWorks' share price, as that had been taken into account before C&W's board accepted the Internet firm's offer.

 'We are very comfortable and happy to be taking shares in CyberWorks,' he said.

 HKT said turnover last year fell 12.65 per cent from a year earlier to HK$28.31 billion.

 The company announced a dividend of 83.6 HK cents per share, 8.8 times the earnings per share of 9.5 HK cents.

 It was also 15.5 cents higher than its earnings per share before provisions.

 HKT's huge profit tumble was mainly due to HK$7.1 billion in provisions to cover obsolete fixed network and equipment.

 Operating profit dropped 28.52 per cent to HK$8.46 billion because of intense price competition, especially for international services.

 Revenue from the sector, which represented 39 per cent of turnover, dropped 38 per cent in the period.

 Local telecoms services, which brought 36 per cent of turnover, was up 9 per cent though, mainly driven by increased demand for Internet, data and network services.

 David Prince, deputy chief executive, said revenue from data, Internet and entertainment services was expected to fuel future growth.

 For example, there were now 77,000 users of HKT's broadband Internet service, as of March, up sevenfold during the year, Mr Prince said. The company installed broadband access in 24,000 homes in March.

 Revenue from Internet and interactive multimedia services topped HK$1 billion, up 66 per cent.

 HKT's mobile revenue fell 15 per cent to HK$4.94 billion despite its customer base growing to 958,000.

 Analysts said the results were in line with market expectations.



HKT backs US$38b deal