PCCW drops on fears special dividend will deplete firm's cash

Shares of PCCW dropped for a second day to end 3.35 per cent lower as investors remained concerned that a high dividend payout would deplete the company's cash and decrease its financial strength.

Richard Li Tzar-kai, the majority shareholder and chairman of the telecommunications operator, is likely to pocket about HK$2.5 billion after the firm decided to pay HK$1.30 per share in a special dividend.

PCCW fell 12 HK cents yesterday to close at HK$3.46.

The stock slumped 13.11 per cent on Thursday after a five-day suspension following a Court of Appeal ruling overturning the company's privatisation plan.

According to calculations by the South China Morning Post, PCCW will pay out about HK$8.8 billion as a dividend to shareholders, causing a significant rise in debt to HK$30 billion from HK$21.6 billion.

The special dividend will be paid on May 18 to shareholders who own the company's shares as of May 8. A company source said on Thursday that PCCW held cash of HK$12.67 billion and, based on its issued share capital of 6.6 billion shares, would pay out HK$8.58 billion or about 67 per cent of its cash to shareholders.

Investors remain concerned about rising debt and the impact of the global economic slowdown on the company's core business.

'Investors could opt to buy other stocks instead of investing more in PCCW, because some uncertainties are still ahead,' said Ricky Tam Siu-hing, a director at Champlus Asset Management.

PCCW said it had no plans to declare a final dividend for last year after reporting a 15 per cent decline in net earnings to HK$1.27 billion from HK$1.5 billion a year earlier despite a 35 per cent rise in turnover to HK$31.95 billion.

In order to attract shareholders, PCCW said it intended to resume a regular dividend policy in the future.

Mr Li said earlier that he was disappointed by the court ruling, saying that he would study the court's reasons before commenting further.

Shareholder bonus

Payout will use up 67 per cent of company's HK$12.7 billion in cash

The special dividend will increase the company's debt to, in HK$: $30b