PCCW Issues Bonds To Intel

by Mary Swire, Tax-News.com, Hong Kong

16 January 2002

Hong Kong tycoon Richard Li's Singapore-based holding company Pacific Century Regional Developments (PCRD) this week sold US$100m of bonds to US company Intel. The bonds, which are due in 2006-07, were issued by and are exchangeable into Pacific Century CyberWorks (PCCW) shares at HK$2.50 per share.

The issue continues Mr Li's strategy of reducing his underlying interest in PCCW; exercise of the bonds would reduce PCRD's interest from 33.5% to 32.1%. Mr Li owns about 76 per cent of Pacific Century Regional Developments.

In October, PCRD sold US$250m of similar bonds to private investors including affiliates of AIG, the US insurer. If all the Intel and AIG exchangeable bonds were exercised, PCRDs stake in PCCW would fall to about 28.6 per cent.

Unlike some of Richard Li's financial gymnastics, however, the deal is positive for PCCW shareholders since the exercise price is set at a 9% premium to the exercise price on AIG's bonds - and both prices are higher than yesterday's closing price of HK$2.20 per share, down slightly on the day.

PCRD said it planned to use the proceeds of the bonds "to provide working capital for the PCRD Group, to reduce indebtedness, for funding of future investments and to improve the group's financial flexibility".

PCCW will also be hoping the deal will encourage closer ties with Intel. In 1999, PCCW and Intel collaborated on what was then the Hong Kong company's flagship project, Network of the World, an interactive television station.

This week, PCCW announced the launch of MPLSVPN.net by its wholly-owned Internet backbone provider Beyond the Network (BtN), which offers end-to-end IP-based communications solutions.

Rather than addressing the end-user directly, BtN offers MPLSVPN.net(TM) through its Internet Service Providers (ISP) customers and bilateral partners in greater China, India, Europe, Russia and North America.

MPLSVPN.net(TM) is a BtN-packaged solution designed to enable in-country ISPs and carriers to expand their IP-based product portfolio and offer their enterprise customers enhanced virtual circuit connectivity worldwide.

Once connected to the BtN Multi-Service IP Port, carriers and ISPs such as Corporate Access, Epoch Internet, TransTeleCom and PCCW can now offer their customers cost-effective one-to-many connectivity solutions. This occurs by terminating virtual circuits on each other's network, while enjoying the same level of security, privacy and scalability as in traditional Frame Relay and ATM network environments.

Through MPLSVPN.net(TM), BtN provides in-country ISPs and carriers the means to sell international Virtual Private Network (VPN) circuits without the burden of deploying an international backbone on their own, and thus compete cost-effectively with global players in the data-transmission channels of Frame Relay, ATM and IPLC.

"Over the last few months, IP VPN connectivity has registered a strong surge in customer demand," said BtN's Chief Operating Officer Braham Singh. "The launch of MPLSVPN.net(TM) demonstrates our undivided commitment to meeting and exceeding our customers' expectations and providing them with competitive connectivity solutions."

With offices and direct network access points located in Asia, North America, Europe and the Middle East, BtN delivers a comprehensive suite of wholesale products, including Internet access (IP Transit), MPLS-enabled virtual circuit connectivity (VPN), Voice over IP (VoIP), through its BtN Multi-Service IP Port.

Unlike traditional legacy networks, where the "one port -- one product" rule prevails, the BtN Multi-Service IP Port allows wholesale customers to purchase products through one single port, thereby increasing their cost-efficiency, scalability and competitiveness.

BtN's customers include emerging carriers, ISPs, Internet content providers and application-service providers.

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