So, what's going to happen with PCCW? What if I tell you Richard Li Tzar-kai will split it into two entities - a telecommunications company and a non-telecommunications one - and list the former in the future? You will say I must be joking. Isn't the privatisation in doubt now with regulators investigating allegations of share-rigging? How can regulators allow a relisting given his corporate governance record? Who will entrust his or her savings with a guy who has wiped out over 90 per cent of the value of a once blue-chip stock and pocketed billions himself? These are all fair questions. But having talked to various bankers, lawyers and private equity guys in the past few weeks, I can tell you I am not kidding. Yes, there is an investigation, and I do believe the authorities shall conduct it in an earnest effort to protect not just PCCW's shareholders but also the integrity of Hong Kong's regulatory regime. Yet, that will mean no more than a few months' delay in the court decision on the privatisation plan as the regulator asks for time to investigate. I just don't see how the court will overturn a decision that was endorsed by the shareholders with a 1,400-to-800 majority - unless the investigation proves that without the hundreds of alleged planted voting rights, the polling result would be significantly different. Yes, the law does empower the Financial Secretary, in the name of public interest, to investigate whether there is any 'fraud on minority' by Mr Li and his board in the privatisation deal. But it would take a lot of political interest and backbone for the government to ignite this powerful weapon. Legislator petitions and shareholder outrage have never carried much weight in government decisions. Neither has the administration showed much political courage in protecting the underprivileged in the past. So I won't count on the government. In short, within months, Mr Li and China Unicom (the other major shareholder with a 19.84 per cent stake in PCCW) will have their way. According to the scheme, which insiders call 'an open secret', PCCW is likely to be divided into two separate entities via a series of asset swaps. All of PCCW's telecommunications service, media and IT solutions business will come under a company named Hong Kong Telecommunications (HKT). (Yes, it has the same name as the old telephone empire that Mr Li gulped down in 2000). The remaining business, mainly the property and perhaps some international assets, will stay with the new PCCW. HKT will no longer be controlled by Mr Li. Instead, its major shareholders will be China Unicom and some funds 'friendly' to Beijing, who will appear as passive investors, leaving the job largely to career managers. The new PCCW goes to Mr Li. The new HKT will seek listing as the market recovers. While regulators may still have a bad aftertaste about Mr Li, they would have little reason to reject the new HKT's listing as long as it complies with every rule and regulation. With Mr Li's army of well-paid lieutenants and lawyers, I have little doubt that the listing application would have zero fault, as we have seen with most of his controversial deals. (In fact, he did mention the possibility of listing the telecommunications-related business in the privatisation circular.) Also, let's not forget who will be the real controlling shareholder of HKT by then. Sure, it will take the investors some years to forget Mr Li's poor record. But he will have nothing to do with the new HKT. More importantly, it will return to its old cash-cow state (though shrunk a bit) that promises a decent dividend. It will not be short of followers. Every party gets their bit, except the minority shareholders of PCCW. Mr Li will get his exit from the telephone business, which he has shown little patience with. Most importantly, the exit will come with billions of profit. Don't forget he has recouped every penny he spent on the merger with the old telephone firm via earlier share sales. As for the privatisation, it's fully financed by PCCW's cash flow. Anything thereafter is profit, the size of which perhaps will depend on the valuation the new HKT gets in its future listing. How about reputation? Well, it depends on how you define it. If Mr Li sees himself as being among the private equity elite, he may even see this as a plus. There aren't many private equity funds that can manage to reap a handsome return with the standard buy-low-privatise-and-relist formula, without spending much real effort in adding value to the business. As for China Unicom, or should I say Beijing (to be more precise), the scheme will give it control over the telephone company that it considers crucial to state security - something that it has longed for since 1997 but didn't dare grasp publicly. Sure, it will have to pay some money to buy Mr Li out, but the heavy reputation cost is saved. Just imagine if PCCW remained listed and the deal had to be done before the public eye. The bankers, who have lent US$23.8 billion to PCCW last September, will be happy to see their loan partially repaid with listing proceeds, though the company's cash-flow will shrink a bit for the moment. So, in a year or two, we are likely to see things back to square one: a listed telephone firm called HKT and a private Richard Li empire - except that billions of dollars have been transferred from the shareholders to Mr Li; a blue chip that has turned into one of the worst performers in the region; thousands of jobs cut; and the corporate governance as well as regulatory regime of Hong Kong becoming a laughing stock.