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Pacific Century CyberWorks is expected to reveal details today of its revised deal to create an alliance with Australia's Telstra, even though negotiations continued late last night.

Sources close to the negotiations said that under the new deal, Telstra would pay CyberWorks US$2.5 billion up front, or US$500 million less than the original proposal, in a complex transaction aimed at creating the largest pan-Asian telecom company alliance.

In a new element to the deal, however, CyberWorks is expected to receive US$1 billion in loans from the Internet protocol (IP) backbone venture being set up by the two companies.

And as widely expected, Telstra would also take a majority stake in CyberWorks' mobile unit CSL, the sources said.

A senior CyberWorks executive said: 'Although some terms have been revised, I would say the overall impact on CyberWorks would be neutral.'

Earlier yesterday CyberWorks deputy chief executive officer Norman Yuen Kee-tong said: 'I can confirm we are in the final stage of the negotiations. We have been working on the (Telstra) matter day and night in the past few days.'

Completion of the alliance with Telstra should give CyberWorks a much-needed boost after the failure of other planned alliances with Internet companies Taiwan-based Gigamedia and US-based CMGI.

CyberWorks shares have fallen sharply since its merger with Cable & Wireless HKT was officially completed on August 17. Yesterday they closed at HK$7.65, the lowest level since December 1999.

'The recent downside in CyberWorks reflects concern the [Telstra] deal might not even go through,' said Indosuez W.I. Carr analyst Greg Feldberg.

'A revived deal could be treated as good news.'

Telstra shares closed yesterday at A$5.85, Australian 1.3 cents higher.

The alliance, announced in April, consists of the 50-50 IP backbone joint venture and the mobile-phone joint venture.

Under the deal, CyberWorks will contribute assets it picked up through its takeover of Cable & Wireless HKT, while Telstra will provide assets and also much-needed cash to CyberWorks.

Under the original deal, Telstra was to have contributed US$1.5 billion for a 40 per cent stake in the mobile group, and US$1.5 billion for injection into CyberWorks through a convertible note with a HK$19.52 conversion price.

Meanwhile, CyberWorks yesterday announced the launch of MartPower, an online marketplace for buyers and sellers across industries.

The platform, co-developed by CyberWorks and Oracle, is aimed at capitalising on trade flows after China's entry into the World Trade Organisation.

Mr Yuen said the platform would offer vertical integration services enabling clients to do one-stop shopping.

MartPower has enlisted supporting services from ABN Amro for financial settlement and UPS for logistics and fulfilment.

Mr Yuen expected this platform to generate at least HK$700 million in transaction volume in the first year of its operation, half from CyberWorks.

The rest would come from the purchasing departments of the two largest clients, Cathay Pacific and Pacific Century Insurance.

He expected MartPower would break-even within a year.



CyberWorks-Telstra deal 'cut US$500m'