C&W in no rush to lower Hongkong Telecom stake

Dick Brown, chief executive of Cable & Wireless, indicated yesterday that the company might be prepared to see its stake in Hongkong Telecom fall below 50 per cent as part of a deal with China when it takes control of the colony next month.

However, he said C&W remained in "the driving seat" in negotiations with the Chinese leadership, it was not facing a deadline to secure an agreement by 30 June and any deal which reduced its 59 per cent shareholding would have to be at the market price or a premium if it involved a change of control.

Mr Brown also confirmedC&W was talking to three potential partners about a transatlantic tie-up in the US and it had held talks with USWest about its 50 per cent stake in the mobile telephone business One2One. C&W owns the other half.

Asked whether C&W's talks with the Chinese were based on it retaining 51 per cent ownership, Mr Brown said: "I don't put so much stock on that. What we are looking at is how you enhance shareholder value."

Although C&W was in the driving seat it wanted to agree a partnership with the Chinese and was talking to a broad range of interested parties in China. "We are under no self-imposed time restraint. We don't feel compelled to be held to any point on a clock or a calendar," he said.

Mr Brown was speaking as C&W announced a 12 per cent rise in pre-tax profits to pounds 1.4bn last year on record sales of pounds 7bn. Hongkong Telecom contributed pounds 1bn in operating profits on sales of pounds 2.7bn. The profit increase came despite a sharp rise in C&W's share of One2One's losses from pounds 63m to pounds 141m.

The growth in sales last year came mainly from Hong Kong, North America and the Caribbean while operating profits from the UK, where C&W's main business is Mercury, jumped from pounds 183m to pounds 317m.

Mr Brown made it clear that, Hong Kong aside, his priority was to conclude a deal in the US. He confirmed that C&W was talking to Global One, the transatlantic alliance between the US long-distance carrier Sprint, Deutsche Telekom and France Telecom, as well as AT&T and Nynex. But he refused to be drawn on which one was the front runner to do a partnership deal.

The talks with USWest have covered the future of its half stake in One2One. The two sides are also thought to have touched on the possibility of USWest's UK cable operator, Telewest, joining Cable & Wireless Communications.

CWC, the pounds 4.5bn venture between Mercury and three UK cable companies, Nynex, Bell CableMedia and Videotron, is about to start rolling out a multi-million pound branding campaign to attract more cable television and telephony customers.

Mr Brown said he would be opposed to any deal between British Telecom and the Government which set BT free from the prohibition on broadcasting television. He said the cable industry "is still a bit fragile and can get snuffed out".

Mr Brown also said C&W would be prepared to see the Government give up its golden share in the company which protects it from foreign takeover. The Government is under pressure to abandon its golden shares in BT and C&W in return for US regulatory approval for the merger between BT and MCI. The merger cleared another regulatory hurdle yesterday when it was approved by the European Commission.