Are You Ready, SingTel? It's Time to Double Down

HONG KONG (04/28/2000) - With the beating that local stocks have been taking in recent weeks, I'm thinking that it might be time for Singapore Telecommunications Ltd. to take another shot at buying Cable & Wireless HKT Ltd.

And why not? I'm sure SingTel and its president and CEO, Lee Hsien-yang, would love to get back at rival bidder Pacific Century CyberWorks Ltd. What better way than to come in and scoop up C&W HKT when nobody's looking?

You see, the way I figure it, PCCW is in a weakened state these days. The company, along with every other Internet wannabe in Hong Kong, has been taking a beating in the stock market.

In the parlance of Internet investors, SingTel execs are sitting at a blackjack table in Las Vegas. The dealer just dealt them a four and a seven. It's time to double down.

Turning heads

Instead of quietly broaching their plans to C&W HKT officials, SingTel should take out full-page ads in every major Hong Kong newspaper with an open letter to C&W HKT shareholders announcing their intention to acquire the company. The ads should stress the amount of money investors would stand to make by accepting the SingTel offer as opposed to making do with the stock and cash offer tabled by PCCW.

SingTel doesn't have to worry about PCCW raising its offer. With all this bloodletting in the stock markets, the same bankers that lined up to back PCCW's acquisition bid for C&W HKT may not be so inclined to up the ante in the face of an aggressive SingTel bid. Even Bank of China would have a hard time finding an excuse to cough up more money under the current circumstances. This means that the house has been dealt a 17 and has to stand.

For their part, C&W HKT investors must be eyeing the cash portion of the PCCW offer, worrying that the value of PCCW stock isn't enough to make the buyout worth their while. They're looking for a better deal.

All these factors make the time right for a counteroffer. When the choice comes down to Richard Li's PCCW bid or SingTel, investors will be asking, "Richard who? PCC-what?"

Naturally, upstart PCCW won't go down without a fight. Even if they can't raise more money to increase their bid, PCCW has a few cards left to play:

For starters, there's the nationalism card. PCCW officials and their backers could try to convince investors that the acquisition of C&W HKT by a foreign company would be detrimental to Hong Kong's economy.

To get this message across, PCCW might air a TV commercial including shots of Richard Li on the Great Wall surrounded by Chinese schoolchildren.

Imagine how powerful and moving that would be: Richard Li smiling beneficently, standing amid a sea of rosy-cheeked Mainland children in white shirts, red scarves. Naturally, all the little girls will have flowers in their hair. All of this set to patriotic songs with a brilliant red sunset in the background.

The Taiwan connection

To counter this kind of propaganda by PCCW, SingTel will need to consider teaming up with Chunghwa Telecom, the dominant operator in Taiwan.

The two companies could form a joint-venture company to acquire C&W HKT. This would have two main benefits: First, it ends all this silliness about HKT being acquired by a foreign company. Secondly, bringing in Chunghwa, with its cash reserves, would increase the total amount of cash that could be offered for HKT, making the offer more attractive to investors.

This move would also stymie PCCW's play to the emotions of local xenophobes.

After all, not even Richard Li could argue that Taiwan is a foreign country, could he? Given all the hot air and rhetoric that the Chinese gerontocracy has invested in the 'One China' policy, this would be impolitic, to put it mildly.

And heck, the Chinese government might even decide to switch sides, hoping that Chunghwa could apply pressure on the Taiwanese government to accept the One China fallacy ... er, policy, I mean.

At any rate, the joint venture would be an effective countermeasure against the great personal relationships that the Li family has with the Beijing leadership.

I'm sure that nobody loves to pound baijiu with old friends more than good ol' Jiang Zemin, but even a raucous round of late-night boozing couldn't turn his interest from a chance to help bring Taiwan under Mainland rule.

In technical investment terms, that's the equivalent of being dealt an ace to go with your eleven. Won't SingTel be glad they took my advice and doubled down.

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