News that PCCW is looking at Britain's broadband market as a vehicle for its first overseas expansion in three years drew a muted response from the market on Monday. The second attempt this year by PCCW chairman Richard Li Tzar-kai to realise his ambitions of becoming a player in the British telecommunications market, and provide an avenue of growth for Hong Kong's dominant fixed-line carrier, failed to excite investors. PCCW's share price closed unchanged at HK$5.10 on Monday, despite a 1.23 per cent rise in the blue-chip Hang Seng index, suggesting that investors have adopted a wait-and-see attitude towards Mr Li's plans. 'It makes one nervous when a telecom company like PCCW invests outside its market,' said Lehman Brothers analyst Peter Miliken. 'I am not too concerned on PCCW because they do not have the ability nor the appetite to invest a lot.' Bidding for British broadband licences virtually gave PCCW a 'call option' on the wireless broadband technology and might allow it to engage in bargain hunting for cheaper licences. PCCW confirmed on Sunday that it had applied for 15 broadband licences, owned by Britain's Ministry of Defence. The new licences, including seven metropolitan licences, seven regional licences and one combined licence in Northern Ireland, have drawn 26 applications so far. Twelve of the broadband licences to be auctioned have reserve prices of ?100,000 and three will start at ?300,000. Bidding will start on May 26, and results will be known on June 6. Offering a 3.4 gigahertz spectrum, successful bidders could use the bandwidth to provide broadband service for residential and small enterprise businesses. As of March, there were 1.77 million broadband subscribers in Britain, a penetration rate of about 3 per cent described by ABN analyst Helen Zhu as 'one of the most under-penetrated broadband markets in Europe'. 'We think it is an opportunity worth exploring for PCCW given the nascent state of broadband take-up in the UK,' Ms Zhu said. 'However, we think the market is likely to react to the news with scepticism... any acquisition moves by the company tend to evoke agitation.' In February, PCCW retreated from a brief flirtation with Cable & Wireless, scrapping plans to take over the troubled telecoms operator. The move was rejected by C&W, and also frowned upon by PCCW investors more worried about its US$4.2 billion debt. But a bid for the broadband licences would let Mr Li fulfil his British expansion ambitions at a much lower cost. In July, Mr Li told the South China Morning Post that wireless broadband technology was yet to be proven, and there was a 50 per cent chance the concept would turn out to be pure hype. But he said it could still be a good investment, given that broadband investment cost less than that required for third-generations (3G) phone services. A PCCW spokeswoman said: 'It is part of our broadband wireless strategy, as we are looking for new growth opportunity.' Hutchison Whampoa, which operates a 3G mobile service in Britain, said yesterday it had no interest in bidding for the British broadband licences.
