Part of PCCW's businesses will undergo a reshuffle in the near future and the new company is expected to sell 45 percent of the stakes to investors. AFP

Telecommunication conglomerate PCCW yesterday announced that the company will reorganize its telecommunication services, media and IT solutions businesses under a new-established arm called HKT Group Holdings.

The company invites investors to submit proposal to acquire the stakes of the subsidiary for up to 45 percent.

It added that the reorganization would improve transparency of corporate structure that would facilitate a future listing even though there is no assurance the deal will finally be completed.

PCCW issued an announcement yesterday, saying the reorganization will improve the group's operational efficiencies and will consolidate the company's five major platforms including fixed line, broadband, Internet, TV and mobile phone.

The board will consider using the proceeds of the possible transaction in further investment in the areas of telecommunications, media and technology.

However, Chairman Richard Li did not unveil the restructuring plan in detail when he met reporters on the sideline of the company's annual general meeting yesterday morning.

"The company will hammer out the reorganization plan in one to two weeks," said Li during the meeting.

He said the reorganization is mainly aimed at coping with the soaring tax expenses.

PCCW was obligated to levy HK$900 million taxes last year. With the net profits of HK$1.5 billion, Li said the company will seek solution with its second largest shareholder the China Netcom Group Corporation (CNC).

Li said the company had faced rising taxes over the previous two years and the reorganization would be an appropriate approach to trim the company's tax expense.

Li also added that the proposal is yet to receive the HKEx's nod and he refused to give further details.

Patrick Shum, chief portfolio strategist of Karl Thomson Securities, speculated Li is seeking his way to exit PCCW behind the "repackaging".

"After the failure of deposing PCCW with the opposition of CNC, Li might use the alternative to cash in PCCW assets and to step out from the company," he said.

Galvanized by the reorganization, PCCW shares soared 9.4 percent to settle at HK$5.1.

Explaining that the mainland telecommunication reshuffle will have a positive effect on PCCW, Li said: "The new Netcom group is expected to receive GSM 3G license, which could upgrade to WCDMA. Therefore, the company will strive to explore value-added services in southern region on the mainland."

He also said: "PCCW can cater complementary support for the foray, which quickens the company's step to enter into the mainland market."

Li also said that he has no intention to launch a buyout bid for Television Broadcast Corporation (TVB), neither in his own nor in the company's name.

(HK Edition 05/30/2008 page2)