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
PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world