PCCW has recently issued a statement that China Netcom is seeking a 20% stake in the Hong Kong company. Final details regarding the terms and conditions of the purchase are still under negotiation. PCCW denied earlier reports that the sale would be as high as 29%.

 

The announcement comes after over a half-year of talks, news of which surfaced in May 2004. Negotiations had been slowed by China Netcom's public offering; however, recent approval from the State Council of China has revitalized the deal. 

 

PCCW is looking to transaction to lower debt and create new sources for sales growth as it faces falling market share and competition from Internet-based phone services. The Hong Kong operator could gain as much as $5.2 billion from the deal. PCCW currently runs a US$29.6 billion debt; US$9 million is due in 2005.

 

The deal allows China Netcom to form a broadband joint venture targeting the expanse of southern China, including Hong Kong. It is also said that China Netcom would have access to the PCCW's technological expertise.