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ONLY a few weeks ago, men like Richard Li were Asia`s internet heroes; basking in public adulation, courted by investment bankers and imitated, down to the crew-cut, bespectacled, blue-shirt-and- chino s look, by a generation of aspiring regional cyber-yuppies.
The destruction of value in Asian technology stocks has taken the gloss off all that.
Li, the 33-year-old son of Hong Kong`s richest man Li Ka-Shing, slipped away on a flight to Tokyo last week for a quiet conference with his erstwhile Japanese rivals.
The fast-talking Li, dubbed the Golden Bachelor, was not alone in his woes. The two highest-flying technology stocks, Softbank and Hikari Tsushin, have collapsed in value amid controversy over accounting practices and heavy losses. Like so many players in the internet world, Li, Softbank and Hikari Tsushin are all intermingled in their interests. Now, say analysts, they may have to pull together to survive.
The dramatic fall in share prices has called into question Li`s bid to control Cable & Wireless Hong Kong Telecom (HKT) through his internet investment company, Pacific Century CyberWorks (PCCW).
Failure to clinch the bid would scuttle a joint venture between Pacific Century and Australian telecommunications giant Telstra announced last week.
Under the joint venture, which will boost both companies` reach into the Asian telco market, Telstra will invest $6 billion in Pacific Century. As well, Telstra will form a global IP (internet protocol) backbone company and a regional mobile company in a joint venture with PCCW.
The Pacific Century/HKT deal, originally worth $76b, was agreed by the C&W board at the end of February, defeating a rival offer from Singapore Telecom.
To get his hands on HKT, Li saw off two men with powerful reputations in Asian business; Lee Kwan Yew, former prime minister of Singapore, and Rupert Murdoch, chairman of News Corp.
Lee`s son, Lee Hsien Yang, runs Singapore Telecom, while News Corp also joined Singapore Telecom`s bid for HKT.
HKT has a joint venture with Star TV, the Hong Kong-based satellite TV business owned by News Corp and headed by Tom Mockridge, a New Zealander who has been running Australian pay TV company Foxtel.
News Corp`s plans for Star TV are viewed as placing it in competition with Pacific Century, and talks have been held between Murdoch and Li.
But Li`s offer for HKT, which has yet to receive formal approval from shareholders, depends on Pacific Century`s share price.
Although an HKT dividend would sweeten the deal, several analysts say the numbers are looking shaky. "The whole value of the offer has declined by about 20% since the deal was announced," says David Webb, editor of a widely read website for Hong Kong investors.
"That`s something C&W shareholders will have to consider."
Dealers are now watching the price of HKT for any sign of consolidation if Pacific Century continues to slide.
The telecoms operator is a flourishing business with substantial cashflow. But Pacific Century is a hot internet stock with no trading revenues.
It has been hit by falling values on the Nasdaq in America, loss of confidence in untested internet ventures and the collapse in Japanese technology stocks.
"The shares have moved down in step," said one analyst. "If they begin to diverge, watch out."
Li, who was on every front page in Asia when the deal was done, made no public comment as Pacific Century shares sank last week. However, brokers and investment bankers friendly to the company said short-term fluctuations did not worry the board.
Its price could recover before C&W shareholders were asked to make a decision, probably in May.
"Progress on the deal is moving forward on schedule," said Joan Wagner, a spokeswoman for Pacific Century. "There has been no change of sentiment in Pacific Century or Hong Kong Telecom."
She said Li and other executives were barred by regulatory practice from commenting on the shares.
Very big numbers confront the dealmakers in London and Hong Kong and share-price volatility means the numbers are changing all the time. For example, Graham Wallace, C&W`s chief executive, is reported to be looking for at least $16b out of the sale.
Yet so complex are the calculations inherent in the cash-plus- shares offer that C&W`s own estimates of the cash element range from $12.2b to $22.9b.
Because the Pacific Century price has fallen so far, all HKT shareholders are expected to demand the cash-plus-shares option. This is bad news for C&W, which may end up owning about 20% of a highly volatile internet stock.
Aside from huge paper losses in his personal holdings, Li has also seen a slump in the value of Pacific Century`s portfolio of investments in other internet ventures - especially those run by his friends in Japan.
It was the Japanese meltdown that really spooked hi-tech stocks throughout Asia.
Li`s reported conference partner in Tokyo was Yoshitaka Kitao, vice-president of Softbank, which has huge problems of its own.
Its share price in Japan has crashed by more than 60% and the price of its Hong Kong-listed affiliate has tumbled by more than 70%. The two are said to have conferred about joint deals to revive their fortunes.
The bursting of the region`s internet bubble has cast a shadow over Li`s inflated reputation as a brilliant dealmaker. It has also darkened the prospects for a slew of coming new issues on Asia`s hi- tech markets.
It is more than just an excruciating matter of "face" for Li.
The fate of his deal is also a question of prestige for the Chinese leadership, a fact known ever since one of Li`s lieutenants, Francis Yuen, disclosed the extent of Beijing`s involvement in backing his successful bid to shut out the Singaporeans.
Rarely can politics, business culture and finance have blended so exquisitely in a moment of truth.
- The Sunday Times, London
