C&W gets `unique foothold' in China

Chris Godsmark

Business Correspondent

Cable & Wireless yesterday pulled off its long-awaited deal with the Chinese government, selling part of the UK group's lucrative stake in Hong Kong's main telephone network and gaining what it hailed as a unique foothold in China, one of the world's fastest growing communications markets.

After months of talks Dick Brown, C&W chief executive, secured a significant coup by concluding the agreement with the Chinese Ministry of Posts and Telecommunications, before Britain hands over control of Hong Kong. In the first phase C&W will sell 5.5 per cent of the its 59 per cent stake in Hong Kong Telecom to China Telecom, the main state operator. In later stages C&W has conceded that it could reduce its shareholding below 50 per cent towards parity with the Chinese.

The deal would raise HK$9,177m (pounds 726m) for C&W, valuing Hong Kong shares at HK $14.25, well below yesterday's closing price of $18.98. The group defended the low selling price, arguing it was the average trading value in recent months. C&W would use the cash to pay off debt before examining further acquisitions.

The announcement sent C&W's share price soaring by 74.5p to a record high of 572p, adding almost pounds 1.7bn to the group's market value. The previous peak of 546p for C&W shares was last year during the abandoned merger talks with British Telecom.

In return C&W said it had achieved the first significant foothold by an outside telecommunications group into China, a market with huge growth potential where just 7 per cent of customers have phone connections. "China Telecom is growing at the rate of one British Telecom every fifteen months," said Rodney Olsen, the finance director.

Speaking from Peking, Mr Brown said one possibility was that future deals with China Telecom could be done through share swaps. "Certainly this is not the end of announcements. Others will follow but we don't want to be held to a date.... It could lead to a situation where we go below 50 per cent, where we go below a shareholding equal to China." He added that any further share sales would be "mutually agreed" with the Chinese.

It was less clear yesterday what China Telecom had offered to C&W in return. The "unique opportunity" was the right to become the major investor in China Telecom's subsidiary in Hong Kong, set up to develop a foothold in the colony. Mr Olson said the subsidiary was vehicle to invest in China itself, getting round a ban on direct stakes by foreign companies.

"This establishes the platform for news to come later. It won't come in the weeks ahead, but certainly in the months ahead. There is much to be done and that's in the interests of both of us," Mr Brown said.

Analysts were guarded about the deal last night, pointing to the difficulty of valuing opportunities in China. Mark Lambert, a telecommunications analyst with NatWest Markets, said: "In principle, access to China is fantastic, but we don't know the details of this deal. We don't know what price they are paying, or the size of stake they will get.''

The announcement caps almost a year of high profile deals by Mr Brown since he joined C&W in July 1996. His two previous coups were to extricate C&W from an alliance in Germany with the utility group Veba, and the deal to attack the UK phone and cable TV market by merging Mercury with three cable companies to form C&W Communications.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Keith Fraser says we should give Isis sympathises free flights to join Isis (AFP)
Life and Style
A picture taken on February 11, 2014 at people walking at sunrise on the Trocadero Esplanade, also known as the Parvis des droits de l'homme (Parvis of Human Rights), in front of the Eiffel Tower in Paris.
techGoogle celebrates Paris's iconic landmark, which opened to the public 126 years ago today
Cleopatra the tortoise suffers from a painful disease that causes her shell to disintegrate; her new prosthetic one has been custom-made for her using 3D printing technology
newsCleopatra had been suffering from 'pyramiding'
Arts and Entertainment
Coachella and Lollapalooza festivals have both listed the selfie stick devices as “prohibited items”
Nigel Owens was targeted on Twitter because of his sexuality during the Six Nations finale between England and France earlier this month
rugbyReferee Nigel Owens on coming out, and homophobic Twitter abuse
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor