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PCCW set to announce Netcom deal

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Updated at 2.50pm: Market sources believe Hong Kong's dominant telecommunications firm is set to sell a stake to China Netcom.

The long-expected tie-up between China Network Communications Group and PCCW , due to be announced on Thursday afternoon, will come as little surprise to the market; except that PCCW will earmark most of the proceeds for investment in China instead of repaying debts.

China Netcom Group, the parent of Hong Kong listed China Netcom, has agreed to pay $7.9 billion to become PCCW's second-largest shareholder.

Contrary to most analysts' expectations, PCCW has earmarked $5 billion for future investment in the mainland telecoms industry with China Netcom Group, according to sources.

Most analysts had expected PCCW would use the entire proceeds to repay the company's debts.

Sources said the balance of Netcom's $7.9 billion purchase price would be used to repay PCCW's debts.

China Netcom Group will pay $5.90 per share, a 25.5 per cent premium to PCCW Wednesday closing price, to acquire 1.34 billion new shares in the Hong Kong company.

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