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Heavy write-downs feared under new rules

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Pacific Century CyberWorks' treatment of its investments in two joint ventures with Telstra of Australia is the unknown factor in its interim results to be released today.

Some analysts believed a new accounting arrangement, in response to rules promulgated at the beginning of the year, would prompt write-downs for CyberWorks' 40 per cent stake in Regional Wireless Co - which owns mobile-phone operator CSL - and its 50 per cent stake in Internet protocol backbone firm Reach.

Their opinion was based on Telstra's decision to make A$999 million (about HK$4 billion) in provisions for its stake in Regional Wireless for the first half of the year.

Merrill Lynch said: 'With Telstra's write-down of its investment in Regional Wireless, we expect CyberWorks to follow suit.'

It estimated the write-down to be US$320 million, offset by a US$2.25 billion book gain from CyberWorks' sale of CSL to Regional Wireless.

Regional Wireless and Reach were expected to record annual goodwill amortisation expenses of US$68 million and US$130 million respectively over 20 years, Merrill Lynch said.

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