Hong Kong Telecoms Firm Scraps Cable & Wireless Takeover

PCCW, the Hong Kong telecoms and internet company, today walked away from takeover plans for Cable & Wireless, the struggling UK telecoms group, amid investor concern.

"The company has concluded that it is not in the its interests for the continuing uncertainty regarding any possible takeover offer for C&W to continue," PCCW said in a statement.

The news puts an end to speculation that Richard Li, the Hong Kong billionaire who owns PCCW, would move for C&W. Reports at the weekend said that he was poised to offer £2.4bn for the company.

The 36-year-old Mr Li, son of Asia's richest businessman, Li Ka-shing, made one of Asia's biggest takeovers when PCCW paid $28.5bn (£17.4bn) to buy Hong Kong's main fixed-line phone company from C&W in 2000.

But investors reacted with alarm to the prospect of another PCCW takeover in the current gloomy economic climate.

PCCW bonds fell sharply after Moody's Investors, the debt rating agency, last Friday put the firm's credit rating under review for possible downgrade on the prospects that its debt burden would increase with an acquisition.

PCCW, advised by Goldman Sachs, said that it had never put forward a price for C&W and had previously ruled out a hostile bid. PCCW also said that it had never held any takeover talks with Japan Telecom Holdings, contradicting reports that it was interested in that firm's fixed-line assets.

C&W suspects that PCCW's overtures had more to do with C&W's stake in the Hong Kong company than in any genuine takeover ambitions.

C&W holds a 14% stake in PCCW, and the Hong Kong firm last month asked for a commitment that this would not be sold while bid discussions were under way.