Should shareholders vote in favour of CyberWorks' takeover, which has already been approved by HKT's majority owner, London-based Cable & Wireless PLC, a court hearing to seek formal approval of the merger will be held at the end of July.

As it stands at the moment, the deal looks all set to go ahead.

The terms of the merger are favourable, with CyberWorks offering an all-stock offer or an alternative cash-and stock offer. However, given the vulnerability of technology stocks at present, the value of the takeover has plummeted from between US$35 billion to $38 billion in February, when the merger was announced, to about $25 billion to $30 billion.

The lengthy official offer document touches on what investors can expect from the merged entity, should the deal go through. Once merged, the new structure would comprise six business units, two of which - involving Internet infrastructure and HKT's mobile telephone business - could quite conceivably be spun off and floated separately on the stock exchange. CyberWorks's Group Managing Director Alex Arena said 'We want to leverage HKT's existing strengths, such as its fixed-line network with its strong cash flows, to generate the funds we require for our new-growth businesses', adding that HKT's network coverage could give the merged group access to a potentially vast market including China.

Even the current volatility of technology stocks is no deterrent to the merger and doubts that the deal will not take place or that Singapore Telecom will enter the running for the company once again have been quickly dismissed by CyberWorks. Mr Arena said 'We are proceeding irrespective of market conditions'.

Fears are surfacing, however, about the impact the merger will have on the companies involved. Richard Li, who intends to become CEO of the merged entity, is no doubt well aware of potential conflicts over staffing. Neither CyberWorks nor HKT have laid down assurances that the merged group would refrain from laying off any of HKT's 13,000 workers. HKT is a majory local employer and the possibility of redundancies has been a concern since Hong Kong began to deregulate its telecommunications industry in 1995. All the merger talk has done is to strengthen those concerns.

Nevertheless the merger looks increasingly like a done deal. After all, CyberWorks is unlikely to let go of its prize HKT, after ousting its opponent Singapore Telecommunications in a bidding war for the company. If the deal does go through, HKT is to become a wholly owned subsidiary of Doncaster Group, a unit of CyberWorks, and its shares will be delisted from the Hong Kong stock exchange. It is a huge deal, not only in financial terms, but moreover, it will really galvanize the growing relationship between Internet and telephony, not just in Hong Kong but on a much wider scale.