SINGAPORE (05/08/2000) - One of the enduring ideas about the New Economy is that the Internet and the Web carry with them certain values that will be realized globally: consumer empowerment, openness of business dealings and even a softening of central-government influence.
Such a concept probably works in the U.S. -- where the idea comes from -- and it possibly works in the European Union, where U.K. telecommunications carrier Vodafone AirTouch PLC's successful hostile takeover of German rival Mannesmann AG would have been unthinkable two years ago.
In Asia, where business is famous for its opaque insider dealings and 'guanxi' -- a Chinese term, understood across the region, denoting the right network of political connections vital to closing any agreement -- the idea of transparent mergers and acquisitions is one that's yet to arrive.
Nowhere is that more so, it seems, than in the high-stakes business of telecom carriers.
Case Study 1
Scenario: In January, Singapore Telecommunications Ltd. (SingTel), an affluent telecom carrier belonging to the Singapore government, put in a financially attractive bid for Hong Kong's Cable & Wireless HKT Ltd. (C&W HKT) with the potential of creating an Asian telecom powerhouse.
Background: The deal would have left SingTel with 38 percent of C&W HKT, a major if not controlling interest. Singapore and Hong Kong are both highly-developed urban economies competing with each other to become the Internet and telecom hub of Asia.
Upshot: A bid from Hong Kong-based Pacific Century CyberWorks Ltd. (PCCW), an Internet startup fronted by Richard Li, son of Hong Kong's premier tycoon Li Ka-Shing, is favored over the SingTel offer.
Speculation: Nobody in Hong Kong (and perhaps Beijing) wanted Singapore's government to control Hong Kong's telecom environment.
Case Study 2
Scenario: In April, SingTel put in another financially attractive bid for Malaysia's debt-ridden telecom player Time Dotcom Bhd. The acquisition potentially would have given SingTel access to Time's 3,600-kilometer fiber-optic network across the peninsular of Malaysia, and a link between its home base and the carrier's substantial operations in Thailand.
Background: The deal would nearly complete Singapore's regional network and spell trouble for Malaysian national carrier Malaysia Telekom Bhd., already struggling to come to terms with a new competitive world.
Upshot: Plenty of smoke will be blown before the deal is done. A Malaysian champion to acquire Time has emerged in the form of the Sapura Group, and Malaysian Deputy Finance Minister Shafie Mohammed Salleh has said the Malaysian government will definitely pay attention to the "national" aspect in the race to buy the equity of Time Dotcom.
Speculation: Important political factions in Malaysia would rather dine out on nuclear waste than allow SingTel free rein in Malaysia's telecom market.
Stories like these are common in a region where the telecommunications market -- which in most parts of Asia has only just been deregulated within the last few years -- is not just a matter of prestige or business sense, but is sometimes linked by governments to issues related to national security.
Hong Kong, certainly, was concerned about the SingTel-C&W HKT deal in the same way that Singapore would have been if the tables had been reversed. Malaysia feels economic pressure from the driving Singaporean city-state, with its wired economy and deep pockets.
The U.S. may well be considered a region in business terms; Europe is finding out that it may have to be a region also, as the New Economy delivers benefits to the big players, but most of all to those who are fleet of foot.
Asia is not one region -- the countries there include some of the richest, some of the poorest, some of the most open and some of the most closed to outside investment. The idea of the zero-sum game -- if you win, I lose -- has by no means departed from political or business thinking here.
In Asia, the New Economy still has many old barriers to overcome.