Ending months of speculation, Cable & Wireless Plc has announced it is to relinquish control of highly profitable Hong Kong Telecommunications Ltd unit. In what is the first part of its strategy, C&W signed an agreement on Friday with China’s Ministry of Posts and Telecommunications to sell 5.5% of its Hongkong Telecom shares to China Telecom in a transaction worth $1.185bn. This deal reduces C&W’s majority holding in the company to 53.5% but it says that in a subsequent phase, further sales will result in a further reduction in its holding with C&W and China Telecom becoming equal shareholders in Hongkong Telecom. News of the deal sent shares in C&W soared 73.5 pence to close at 571 pence.Hong Kong Telecom represents a major part of C&W’s business. In its last financial it contributed approximately 44% of the groups revenues and 65% of operating profits. But C&W clearly believes it has found a way to maintain its profitable interest in the company while opening up the key Chinese market. The Hong Kong territory is returned to Chinese rule on July 1. Last month, Chinese State-owned telecommunications company China Everbright announced it was to buy a 7.74% holding in Hongkong Telecom from CITIC Pacific, the second largest shareholder in the company for $1.47bn. The move was seen as a maneuver to bring more of the telecoms company under the direct influence of Beijing. Whereas CITIC says it operates with autonomy from Beijing China Everbright has far closer links with the Chinese government.
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