China Netcom Could Get Up to 50% Of PCCW Assets-Source

HONG KONG (Dow Jones)--US private equity firm Texas Pacific Group is trying to woo PCCW's reluctant Chinese shareholder on a proposed asset sale by saying it could have up to 50% of the deal, a person familiar with the situation said Saturday.

The person, who spoke to Dow Jones Newswires on condition of anonymity, was unable to provide details about how the deal would be structured as two rival bidders seek to acquire PCCW's core telecommunications and media assets.

TPG-Newbridge is bidding against Australia's Macquarie Bank, which also has offered to let China Netcom get up to 50% of the assets, another person familiar with the situation said earlier.

The bids for PCCW's core businesses have received a chilly response from China Network Communications Group, which owns 20% of PCCW and says it wants no major changes at the company run by Hong Kong tycoon Richard Li.

The Macquarie bid is valued at US$7.3 billion, while the TPG-Newbridge bid is valued slightly higher, people familiar with the situation have said.

A spokesman for China Netcom said Saturday the company would have no new comment on matter.

China's approval is the key to reaching a deal, people familiar with the situation said after China Netcom raised its objections, saying it did not want to see any changes to PCCW's key assets.

State-run China Network Communications Group, the parent of Hong Kong-listed China Netcom Group, bought into PCCW for US$1 billion in March 2005 as a strategic investor.

Li, a son of Hong Kong's wealthiest man, Li Ka-shing, started exploring the possibility of exiting PCCW's telecommunications and media businesses earlier this year, a person familiar with the situation has said.

That would leave PCCW as a smaller company mainly with real estate assets.

As the rival bidders seek to sell the Chinese phone company on the idea of an asset sale, another person familiar with the deal said Friday night that Macquarie intends to be a long-term major shareholder in the new company that would emerge from the sale.

Macquarie would take an active role in management, the person said.

"This isn't about capital appreciation for Macquarie. They are taking a long term view," the person said.

PCCW bought Hong Kong fixed-line operator Cable & Wireless HKT, formerly known as Hong Kong Telecom, during 2000 in a US$28 billion cash and stock deal paid mostly in PCCW shares that soon plunged as the "Dotcom Bubble" burst.

"Macquarie wants to call the new company Hong Kong Telecom to signal the return of the assets to a pure telecom business. It would also reflect the company's close relationship with Hong Kong," the person said.

TPG-Newbridge had issued a statement earlier Friday indicating it wants to keep all parties, including China Netcom, happy with any deal for the PCCW assets.

-By Dirk Beveridge; Dow Jones Newswires; 852-2802-7002; dirk.beveridge@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 25th June 2006