When Richard Li
sat down with Insight for our December 1999 interview which was
actually completed in November in Hong Kong,
Insight asked Mr. Li what was his vision for Pacific Century
Cyberworks, his Hong Kong flagship company.
Richard’s response was:
“ In the simplest
terms Pacific Century Group aims to be the leading Internet investment
vehicle in the
Asia-Pacific region, both by acquiring and funding net ventures and by
developing our own
businesses. The model is akin to that of Japan’s Softbank or America’s
GMGI, but we
are going to go much further than that. At the core of our strategy is
Group’s Hong Kong-listed technology flagship Pacific Century
That was launched in May 1999 through the acquisition and renaming of a
small Hong Kong listed company. Today PCC has a market cap of US$6.6
and is the third largest Internet company in Asia.”
On February 29, the Pacific Century Group
took an immense step toward the realization of the goal set out above
when it reached agreement with Cable & Wireless HKT Ltd. to acquire
Hong Kong’s biggest telecommunications company for $38.1 billion.
Century outbid Singapore Telecommunications Ltd., SingTel – the
government owned phone company run by Lee Hsien Yang, the 42-year old
of Singapore’s former Prime Minister and current Senior Minister, Lee
Kiew, in a contest that had the whole world watching.
The successful acquisition emphasizes the
immense buying power that Asia’s new Internet start-ups wield and the
increasing effect such companies will have in their stock markets and
in the regional economies. Analysts believe that the deal also
may indicate behind-the-scenes influence by the Chinese government,
which indirectly owns 10 percent of HKT. China is believed to
have opposed having the key telecom sector pass under the control of a
non-china source. Mr. Li is also known to have good relations
with Senior Hong Kong Government officials such as Tung Che Hwa and
with the senior leadership in Beijing.
These close contacts in the Hong Kong and
Chinese government and the just completed acquisition of Cable &
Wireless HKT Limited could give Pacific Century something that Cable
& Wireless has long sought: entry into China, potentially one of
the largest and fastest growing telecommunications markets.
Pacific Century is already pursuing an internet venture that includes
Intel and other partners. If telecom access was also added to
this mix, it could greatly increase Pacific Century’s long-term market
potential in this project.
Stay tuned and re-read Richard Li’s Insight
interview below for further insights on additional moves by this
leader in business in Asia.
thank you for agreeing to talk with us. Could you tell us a
little about the Pacific Century group of companies and particularly
about the recent IPO of your Pacific Century Cyberworks group?
1: In the simplest terms
Pacific Century Group aims to be the leading Internet investment
vehicle in the
Asia-Pacific region, both by acquiring and funding net ventures and by
our own businesses. The model is akin to that of Japan’s Softbank or
America’s CMGI, but we are going to go much further than that. At the
core of our
strategy is the Group’s Hong Kong-listed technology flagship Pacific
Cyberworks. That was launched in May 1999 through the acquisition and
of a small Hong Kong listed company. Today PCC has a market cap of
billion and is the third largest Internet company in Asia.
The flagship comprises three supporting legs or businesses.
First, there is Pacific Convergence Corporation which grew out of a
60-40 joint venture with INTEL, which continues to hold 13%; it aims to
be the largest provider of broadband internet services in Asia via its
satellite network serving 110 million connected cable households.
Working with local cable operators, the service will converge TV with
Internet through a global portal called NOW. The second leg, Cyberworks
Ventures invests in or forms partnerships with local and international
IT and Internet businesses. The third leg
is the $1.6 billion Cyber-Port project, a co-development between the
and the Government of Hong Kong. Cyber-Port is a 26 ha campus style,
multi-use complex designed to jumpstart Hong Kong’s IT sector by
forming a cluster
of Asian and international IT companies in one location. I admit this
not a small task. The key is that we are bringing together the most the
talented people and entrepreneurs in Asia under one roof.
press reports I see that since the IPO, Pacific Cyberworks has made
investments in numerous companies noted below:
Pacific Ocnvergence Corp Investment: SoftNet Systems/ISP Channel 23%,
cyberworks Venture investment: CMGI 3.4%, Action Ace.com 10%, Biz
Travel 3%, Cash on-line, inc. 5% with 5% option, Clarent Corp 3%,
Creditland 5%, Ilink.net 80%, intelligenisis 6%, MediaRing 6%, Outblaze
20%, SilkRoute 25% with 5% options, StarEast
Information Technology 20% with 10%+5% options
Can you tell us what strategy the company is following in aquiring new
companies and where you see Pacific Cyberworks being as a company
in five years time?
2: There are three
facets to our strategy for Cyberworks Ventures. First, we are creating
a badly needed incubation environment for established and startup
in Asia. With startups, we gain access to the technology created by
companies that are faster and more nimble than ourselves, while they
access to management, superior resources and a platform to implement
ideas. For established firms, Cyberworks Ventures acts as a pan-Asian
for regional and international companies. So for example, in September
agreed to exchange US$ 350 million in ordinary shares of Pacific
Cyberworks for $350 million of common stock in the NASDAQ-listed CMIG.
is the second largest, most diverse network of Internet companies in
world. Last, much like CMIG does in the US, or Softbank does in Japan,
Ventures offers our shareholders a chance to participate in the growth
the Internet without the risks. You have to be analytical and highly
because the quality is wide ranging.
Insight: You have
been very identified with several innovative moves in Hong Kong-first
the move into Media with Star TV and now with more aggressive targeting
of Internet and high tech industries. Also, as you are well
Malaysia and others are trying to attract these same companies, what
do you see Hong Kong offering to both local entrepreneurs and foreign
business as a site for high tech investment?
3. When we talk about
the Internet we are speaking of a very big pie indeed and in the case
of Asia one that has hardly been touched. So a company like Microsoft
will probably have to be in several locations. Hong Kong has to be on
the list. We have the freest press in Asia so access to information and
to the media is fantastic. We have the largest market cap in Asia so
access to capital is there. We
have an established and respected legal system. We have the
– you can have a telephone and Internet connection up and running in
days and you don’t have to pay anything extra to get it done. And
who has an eye on China -- and who doesn’t -- really doesn’t have a lot
choice. It takes 6 and half hours to fly from Beijing to Southeast
And if you are in the IT business, by the time you land, somebody else
got the deal.
group has been very identified with the Hong Kong government’s decision
to open the Hong Kong Cyberport. Where does this project now
stand and how do you answer critics who see this more as a real estate
project than as a real high tech industrial park?
4. Construction began in
September and there are five phases leading to completion. For example,
by 2001 there will be 23,000 sq m of office and 10 sq m of apartments
finished. The entire campus, with offices, apartments, houses,
cybermall, and recreational facilities like the golf course will be
completed by 2007. Microsoft is the latest
to join the list of prospective tenants which include everyone from Sun
Microsystems to Softbank, all intending to apply for admission. As to
we have already seen one benefit in the sense that Cyber-Port has woken
up the business community to IT and its impact on the new age economy.
that is what it is all about. Cyber-Port is not a real estate project,
is about creating an environment where people can think and work and
If successful, and I have no doubt it will be, it will create what
to a new information economy for Hong Kong and thousands of new
and hundreds of millions of dollars in new business. In that sense, the
government has not done anything unusual. Take for example the
– usually land and tax breaks -- that state governments in America
to GM or Toyota when they choose a site for a new car factory.
critics in Hong Kong are saying that Hong Kong’s economy must change
from a real estate driven economy to more of a service driven economy
with a focus on IT. Do you agree with this assessment and how do
you see Hong Kong’s economy developing over the next 5-10 years.
5. Not just the critics.
Hong Kong needs to develop new engines of growth, first and foremost
the government appreciates that as much as anyone. On one hand the
away from real estate is already happening due to market forces. Rental
prices for prime office space in Hong Kong have fallen 46% since early
1997. At the same time the government is taking its own steps to make
transition. In addition to Cyber-Port, Hong Kong is breaking ground on
new $450 million Science Park and has set aside tens of millions of
to fund IT startups and related university research. But the critics
forgotten how fast Hong Kong can change and adapt, particularly when it
involves trade and world markets. Microsoft estimates that there are
20,000 IT startups here. And when Hong Kong businessmen realize the
savings and new revenue streams that can be generated from the net,
the local rice dealer will be surfing the web to find the best prices.
they’re not already.
this point in time, Hong Kong has been pretty much the main door for
companies interested in investing and supporting China
operations. Now certain observers say the future will bring
increasingly direct investment into
China which will bypass Hong Kong. They also see the movement of
regional offices from Hong Kong to China as becoming the model for most
companies to follow. Do you agree with this assessment and if so,
doesn’t this dictate a downturn in the Hong Kong property market and in
Hong Kong’s viability as a service hub for China operations?
6. When Hong Kong
manufacturers shifted their operations to China in the late 1980s many
we were finished. Instead it turned out to be a huge benefit by
hundreds of billions of dollars in new trade and services. Of course,
new opportunities open up on the mainland it is only natural that
will go directly into China, but they will still need the management
marketing skills, infrastructure and relationships we’ve developed over
the past ten years. There is an art to working in China. At the same
it would be misleading to say this is a zero sum game, where the Hong
economy shrinks while the Chinese economy grows. The SAR doesn’t have
be the main door to the mainland. Even if it is just a side entrance,
Kong will still grow in leaps and bounds.
months ago, U.S. Ambassador to Singapore, Ambassador Steven Green who I
know is a friend of yours, was a guest of our “Insight
Interview.” He noted some of the adjustments Singapore has made
in response to the Asian Financial crises that will made it more
competitive in attracting investment. In general, how would you
assess Hong Kong’s response to the Asian Financial Crisis and do you
think that Hong Kong has also increased its competitive advantage in
attracting investment? If not, what more do you think is needed?
7. The Asian Financial
Crisis was an unprecedented historical event and each country had to
respond according to its own circumstances and without a blueprint. It
hit Hong Kong hard
and I think the government responded to it as well as anyone. That is
up by the news that economic growth accelerated to 4.5% in the last
quarter, far surpassing expectations. However there were some
of the crisis including the fall in property prices and end to the
inflation spiral that was driving up wages. If the crisis had not have
the government and business community would have been less willing to
embrace IT and other initiatives like reforms in education and medical
Not everything is rosy and we can’t afford to take anything for
The deteriorating environment is a major obstacle to Hong Kong’s
and has been cited as such by foreign investors. So it is
that the SAR’s chief Executive Tung Chee-hwa made the environment the
priority in his annual October address. We also have to develop a more
labor force to meet the needs of IT. And we need more creativity. But
things are beginning to happen.
current Hong Kong government has been criticized in certain circles for
interfering in the market to a greater extent than the form British
controlled government. Specifically, there has been criticism of
government entry into the share market and other moves. Do you
agree with the view of the critics
that the current government is less free market oriented and do you see
this as a trend that is likely to continue?
8. The government took a
lot of heat for its intervention in the market last year. But as I said
before, the crisis demanded resolute, visionary and untried measures.
over whether this was right or wrong will go for years. As it turned
the market hasn’t suffered from the intervention and the government has
received abundant praise for the way it is now disposing of the shares
purchased through the creation of a unit trust called the Tracker Fund.
The fund has created a way for small investors in Hong Kong to invest
the market without the high risk involved with stock picking. The
did not stop the Heritage Foundation from naming Hong Kong last week as
the freest economy in the world. So, don’t give up on us yet. We
still a force to be reckoned with.
thank you very much for taking time out of your busy schedule to speak
with us. We also wish you success with all your many ventures
which should have a signifigant effect on changing Hong Kong and the