C&W set to find partner for deal

Cable & Wireless (C&W) is likely to bring in an international telecommunications company as a strategic partner in the proposed merger of its Hong Kong subsidiary with Singapore Telecommunications (SingTel), according to sources.

The move would enable the British-based company to offload a large part, if not all, of its 54.4 per cent stake in Cable & Wireless HKT and fit in with its strategy of shifting focus from the Asian region.

The name of the strategic partner has not been disclosed, but it is believed Deutsche Telekom, which is said to be reorganising its Asian mobile business, is working closely with SingTel.

C&W was planning to sell a majority of its stake to raise several billion pounds in cash, one analyst said yesterday following a conversation with the company.

Its stake was worth about $128.88 billion based on yesterday's Hong Kong stock market close.

'The move to sell its C&W HKT stake is part of the exit strategy from Asia,' Jardine Fleming Research Singapore said in a morning note citing its British telecoms analyst Dwayne Taylor.

The company would focus on British, European and Australian businesses, the report said.

The introduction of a third party would complicate the proposed deal, dubbed a 'merger of equals'.

'The merger would make the combined entity very attractive to some international telecom operators,' a source close to the deal said.

Details of the merger are expected to be worked out in about a week's time.

The market yesterday responded positively to the proposed deal, with HKT gaining 2.35 per cent and SingTel 5.26 per cent.

Any merger would be subject to approval by the Telecommunications Authority.

Au Man-ho, senior assistant director (regulatory) at the Office of the Telecommunications Authority (Ofta), said there were no foreign ownership restrictions, but Ofta would study how the proposed entity would affect consumers and competitors in order to assess the impact.

The Singapore Government, meanwhile, has given its assurance it will not meddle in Hong Kong affairs if a merger takes place.

'We do not get involved in the day-to-day running of any of our government-linked companies,' said Chan Ser Huang, a spokesman for Temasek Holdings, a government investment arm which holds a controlling 76 per cent stake in SingTel.

The Singapore Government will probably be the largest shareholder in the merged entity.

Control over HKT has long been a politically sensitive issue in Beijing.

It was widely believed Beijing tried to wrest control of the firm from C&W ahead of the 1997 handover to safeguard the SAR from outside interference.

HKT may have to sell some of its existing Singapore telecoms interests if the proposed merger is to proceed.

The Hong Kong company and its British parent have stakes in MobileOne, a mobile-phone operator which competes against SingTel.

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