Richard Li plans to turn a new property venture being spun off by PCCW, his Hong Kong fixed-line telecommunications company, into a luxury residential developer with projects throughout Asia-Pacific.

Mr. Li, the younger son of Li Ka-shing, Asian's richest businessman, said PCCW would soon place shares in the new venture to bring its free float into line with regulatory requirements.

"Investors came to us a year ago and suggested we should split the property assets from the telco because they don't really consider the value of our properties when they look at the company," Mr. Li said in an interview.

Under the arrangement, in effect a back-door listing, a shell company Dong Fang Gas, will pay HK$6.56bn ($842m) in shares and convertible notes for PCCW's property portfolio. This includes the company flagship Cyberport Hong Kong residential and office complex as well as office buildings in Beijing and Hong Kong and a retail development.

Eighty potentially valuable telephone exchange sites are also part of the deal, although PCCW will retain part ownership of these.

PCCW first announced the deal this month during the release of its 2003 results, in which it reported a full-year loss of HK$6.1bn after writing off the value of Reach, the struggling undersea cable venture it owns with Australia's Telstra. Mr Li said "Realistically, the transfer of the property assets is the beginning of a new business, not a divorce.

"We have a very strong property team, even during Sars [sic], they were able to sell our Bel-Air development," referring to the company's luxury residential development at Cyberport.

Dong Fang Gas, which is likely to soon be renamed Pacific Century Premium Developments, will be chaired by Mr. Li. But its new chief executive officer, Robert Lee, current chairman of the PCCW infrastructure, will be the main driver of the business.

Mr. Lee said: "We will design and build properties for people who have an appreciation of the finer things in life. The number of these people in Asia-Pacific is growing rapidly."

The company declined to give details for the several sites being considered for development.

PCCW will have a 93 percent stake in Dong Fang Gas after the back-door listing is completed which means that the company must swiftly arrange a share placement to bring its free float to at least 25 percent in accordance with stock exchange rules.

Mr. Li, for his part, will continue to focus on PCCW, whose bigger than expected 2003 loss combined with news of the property deal unnerved investors. He is lobbying the Hong Kong telecom regulator for PCCW to be allowed "more competitive freedom" to challenge rivals.

Mr. Li is also working on the roll-out of his wireless broadband Netvigator business in thw UK where the market penetration for broadband services is just 11 percent compared with 56 percent in Hong Kong.

"The transfer of the property assets is the beginning of a new business, not a divorce."
-Richard Li, chairman of PCCW.

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