Update: Singapore, HK Carriers in Merger Talks

HONG KONG (01/26/2000) - Singapore Telecommunications Ltd. (Singtel) and Hong Kong carrier Cable & Wireless HKT Ltd. last night announced they are in talks on a possible "merger of equals" that would create an Asian telecommunications giant.

Both companies said the outcome of the discussions is uncertain. According to a statement by Singtel, no terms have been set for the proposed deal. Cable & Wireless HKT is 54 percent owned by U.K.-based Cable & Wireless PLC. Singtel is majority owned by the Singapore government.

Recent regulatory changes in both Hong Kong and Singapore will soon leave both companies facing a host of competitors. Singapore's government announced just last week that it will open its communications market on April 1 this year, a full two years earlier than had been planned [See "Singapore to Speed Up Telecom Deregulation," Jan. 24]. Hong Kong's Office of Telecommunications Authority recently licensed six local fixed broadband carriers within Hong Kong and 12 external telecommunications carriers [See "Hong Kong Awards Six Broadband Licenses," Jan. 19].

The moves toward liberalization by both governments are aimed at the competition among Hong Kong, Singapore, and other regional business hubs to become the center of Asia's Internet industry.

Analysts said a merger could be a boon to both companies as they face growing competition from carriers based inside and outside the region.

In many ways, bigger is better, whether in the West or in Asia, said Geoff Johnson, a telecom research director at Gartner Group Inc., in Brisbane, Australia. Johnson believes the major carriers in four Chinese markets -- Mainland China, Hong Kong, Singapore, and Taiwan -- eventually will merge into a single Chinese mega-carrier.

"What we've seen here is an incremental step in that, and a major step," Johnson said.

A merger might also cool the rivalry between Singapore and Hong Kong to become the hub of Internet business in Asia, to the benefit of both.

The relationship "could become more cooperative than competitive," Johnson said.

Another observer said a merger could bring together complementary strengths of Hong Kong and Singapore in e-commerce. Whereas Singapore has developed good solutions for e-commerce, Hong Kong offers less expertise -- but a much bigger market, said Joe Sweeney, a research director at Gartner Group, in Hong Kong.

"Singapore's e-commerce ventures have been strangled by the fact that it's really a tiny customer base," Sweeney said. Hong Kong, by comparison, has more consumers and far more businesses.

The two carriers "understand that what's required for the next generation of e-business is a reliable, scalable, regional network," Sweeney said.

HKT, in Hong Kong, can be reached on the Web at http://www.cwhkt.com. Singtel, in Singapore, can be reached online at http://www.singtel.com.

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