A Pacific Century CyberWorks-Chinadotcom "Partnership"?
Talks between them are ongoing, as the two consider an infrastructure-content deal
Pacific Century CyberWorks Ltd., the acquisitive Internet holding company run by Hong Kong tycoon Richard Li, may form a partnership with Hong Kong-based Internet company Chinadotcom Corp., according to CEO Peter Yip. Chinadotcom's chief says he has been speaking weekly with Li about a linkup, but he insists that any deal won't take the shape of another acquisition by CyberWorks.
"We're talking about a partnership," Yip told Buisness Week editors in New York on Mar. 3. "We want to partner with an infrastructure company. Chinadotcom is not for sale." Yip, outfitted head to toe in Tommy Hilfiger clothes, says Li calls him late at night or early in the morning to talk. "He doesn't need a lot of sleep," Yip chuckles.
CyberWorks is no stranger to tie-ups and acquisitions. Last week, the company beat out Singapore Telecommunications in a takeover battle for Cable & Wireless HKT, the Hong Kong telephone giant. At $38 billion, it was Asia's biggest takeover deal ever, and one that will give CyberWorks the means to roll out video programming and Internet access over broadband networks. In the same week, CyberWorks also announced a tie-up with China's largest computer maker, Legend Holdings, in which the Chinese manufacturer will make computers with a built-in cable modem designed to carry CyberWork's Web content and video programming.
MAKES SENSE. But until recently, analysts have wondered where CyberWorks, fundamentally an infrastructure company, would get content. It's working on developing its own and also linking with a number of Chinese-language portals and Internet content providers already operating in China. CyberWorks has spent hundreds of millions of dollars on stakes in popular portals Sina.com, Sohu.com, and Tom.com. But a partnership with Chinadotcom would make sense for both companies, as they both seek to expand in China. Currently, no broadband network has been given permission to operate in China, but analysts predict Beijing's restrictions will dissolve within three to five years as China opens up under World Trade Organization guidelines. Yip agrees. "WTO will force a lot of tough decisions," he says. "It would let foreign investors into the network, and enable more e-commerce."
At that point, the demand for both content and means to deliver it will explode. Chinadotcom is already in a stronger position to capitalize on that potential than some of the other Chinese-language Web sites because the Chinese government -- through its official news agency, Xinhua -- is Chinadotcom's third-largest shareholder. Sohu.com and Sina.com were both set up with private capital. Tom.com, another Hong Kong company, is the brainchild of Richard Li's father, the billionaire Li Ka-shing.
Chinadotcom operates the China.com, Taiwan.com, and HongKong.com Web sites, and it's actively working to develop itself as an e-commerce site. It's due to launch wireless Internet service this month, Yip says. Chinadotcom has also recently partnered with French news agency Agence France-Presse to deliver real-time sports scores.
Chinadotcom claims 25 million users in five nations -- China, Hong Kong, Taiwan, Singapore, and South Korea. Its operating revenues were $10.8 million in the fourth quarter of 1999, double the $5.2 million in the third quarter. If Peter Yip is right, a tie-up with Pacific Century CyberWorks could add more zing to those numbers.
By Sheri Prasso in New York
EDITED BY DOUGLAS HARBRECHT