China Netcom Group announced Thursday it has agreed to pay approximately one billion US dollars in cash, at 5.90 HK dollars per share, for a 20 percent stake in the enlarged share capital of Hong Kong-listed PCCW Limited.

China Netcom will acquire the stake by subscribing to 1,343,571,766 new shares, the company said in a press release.

The company said it intends to be a "committed investor in PCCW, participating in shaping the future strategy of the company" through membership on the board of directors and existing board and management committees.

As part of the agreement, which is still subject to PCCW shareholder approval, China Netcom will nominate directors to three new seats on the board of PCCW, one of whom will become a deputy chairman of the Hong Kong company.

PCCW will earmark up to 5 billion HK dollars to pursue telecommunications opportunities in the Chinese mainland. Zhang Chunjiang, general manager of China Netcom Group, called the cooperation "a win-win transaction which will create growth opportunities for both parties.

"We believe that with PCCW being the leading telecommunications operator in Hong Kong, its advanced management system, its professional management team and operation experience in highly competitive markets will enable China Netcom Group to accelerate innovations in our business management and enhance our marketing expertise," he said.

PCCW Chairman Richard Li said, "The main purpose of this strategic relationship with China Netcom Group, a major Chinese state-owned telecommunications company and a broadband leader, is to create long-term value for our shareholders through actively pursuing new business opportunities.

"This transaction will lay the foundation for PCCW to participate in the high potential and fast growing telecommunications market in the Chinese mainland. At the same time, the capital injection will further strengthen our financial fundamentals," Li said.

China Netcom said the share purchase is subject to the approval of PCCW shareholders. The date for an extraordinary general meeting will be announced in due course.

China Network Group Corporation is one of the largest telecommunications companies in China. It is the exclusive fixed line telecommunications service provider for the Beijing 2008 Olympic Games.

PCCW Limited, one of the leading communications companies in Hong Kong, will set up a P.R.C. Business Development Committee, which is to be comprised of two nominees each from PCCW and from China Netcom.

Source: Xinhua