June 17 (Bloomberg) -- PCCW Ltd., Hong Kong’s biggest telephone company, can generate more value for its assets by placing them in a proposed business trust than through other methods of reorganization, Chairman Richard Li said.
A trust would be able to pay out a larger proportion of its income as dividends than a company structure, Li said at a shareholders meeting in Hong Kong today. Earlier in the meeting, Li said PCCW plans to give at least HK$1.1 billion ($141 million), the payout in 2010, in annual dividends for three years after the spinoff.
PCCW this month won stock exchange approval to sell a stake in a trust comprising telecommunications assets that it intends to list, a sale that Macquarie Group Ltd. said may raise as much as HK$13.5 billion. Proceeds from the spinoff, at least the sixth attempt to reorganize since 2006, may help PCCW boost investments in faster-growing businesses after its stock underperformed Hong Kong rivals including SmarTone Telecommunications Holdings Ltd. this year.
The ability of the proposed trust to distribute a higher proportion of its income to shareholders is the “main benefit” of the reorganization, according to a June 13 report by Macquarie analysts including Lisa Soh.
PCCW rose 1.3 percent to HK$3.20 at the midday break in Hong Kong trading, poised for the highest closing level since April 26. The stock has declined 7 percent this year, lagging behind the 57 percent jump for SmarTone, the mobile carrier controlled by the city’s biggest real-estate company Sun Hung Kai Properties Ltd.
Hong Kong Exchanges & Clearing Ltd. approved the plan to list the trust after PCCW committed to retaining its information technology business for at least three years, following an earlier rejection, the carrier said June 2. The plan still requires further regulatory and shareholder approval, PCCW said at the time.
PCCW plans to sell a minority stake in the trust, which will own divisions that offer fixed-line, mobile-phone and broadband Internet services, through the proposed listing, the company said this month. After the spinoff, PCCW will retain operations including divisions that offer pay-television and computer services, it said.
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