PCCW's apparently bold initiative to create a subsidiary company for 3,000 employees has been greeted with disappointment by investors and affected staff. The creation of Cascade - a vehicle set up to employ network engineers, operators and consultants - failed to impress analysts who attended the company presentation yesterday, as they were given little idea about immediate cost savings. Also not impressed were the 3,000 employees singled out to join a new company whose salary structure could be expected to be significantly different. Chief operating officer Mike Butcher offered little direction on how the measure could cut costs. In response to repeated questions on whether there would be salary cuts, he said he would prefer to talk to employees before commenting to the press. Analysts said the new initiative was packaged as offering more opportunities for staff, but was rather a disguised form of salary cut. 'The whole process of creating Cascade is for employment restructuring,' said BNP Peregrine analyst Voon San Lai. 'It is a creative way in which PCCW can alter its employee structure.' He said that with the reorganisation, PCCW stood to benefit from lower pension charges because the new company would have a defined contribution scheme, unlike PCCW's defined benefits scheme which incurred higher liabilities. In addition, there could be tax benefits for PCCW. Last year, PCCW paid HK$4.5 billion in salaries to its 14,000 employees. Analysts estimated the staff costs for the 3,000 employees affected by the reorganisation would be between HK$800 million and HK$1 billion. Assuming a 20 per cent salary reduction at the new company, PCCW would save about HK$160 million to HK$200 million a year, somewhat lower than market expectations before yesterday's announcement. Unlike the subcontracting arrangement announced by PCCW last month, the creation of a wholly-owned subsidiary still leaves PCCW with the payroll burden. The voluntary subcontracting programme saw almost 1,600 staff set up 17 independent companies for guaranteed jobs in the next three years. But Cascade is expected to find more revenue streams by itself. Cascade, whose employees build and maintain automatic teller machine networks for banks, as well as operating systems for share trading and leading transport and infrastructure companies, is to become a profit centre, according to PCCW. Set to become the largest technical services firm in Hong Kong, one of Cascade's key roles is to serve growing sectors in new markets.