In the PCCW flurry this morning, what’s
been largely overlooked is the China
angle. State-owned China Netcom bought 20% of PCCW early last year for
US$1 billion and PCCW has bought just under half of China Netcom’s CNC
Broadbank network which is rolling out in six Chinese cities.

The local fishwrappers have concentrated on
PCCW’s Hong Kong business – but you don’t have to be too bright to realise where the
real growth potential has always been.

The interest in PCCW’s ability effectively to
turn its phone lines into cable TV is hardly earth-shattering –
it’s what any half decent telco should do if not held back by government protection of
existing TV interests.

But HK is a mature and not-all-that-large
market. China is the blue sky.

And in that case, it’s China Netcom as much
as Richard Li that Macquarie and Newbridge should be chasing. From the small amount of
information available so far (and all of it’s from the South China Morning Post
– no-one here has been able to add anything to the original story), it looks
like Newbridge has its eye on the whole prize while Macquarie is just after HK.
That doesn’t make much sense.

Certainly the HK media and telephone
business as a stand-alone isn’t worth $A7 billion on any normal pricing basis.
It’s barely profitable.

Peter Fray

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