Dec. 7 (Bloomberg) -- Richard Li raised his holding in PCCW Ltd. for the second time since a failed sale last week that would have given control of Hong Kong's biggest telephone company to state-owned China Network Communications Group.

Li, son of Hong Kong billionaire Li Ka-shing, paid HK$54.2 million ($7 million) on Dec. 4 to raise his PCCW stake to 27.2 percent from 27 percent, according to a statement posted on the Hong Kong Stock Exchange Web site last night. On Dec 1., PCCW Chairman Li boosted his holding to 27 percent from 26.4 percent.

Li is strengthening control as $450 million of bonds convertible to PCCW shares fall due next month. China Netcom would have gained control of the Hong Kong phone operator if shareholders of Pacific Century Regional Developments Ltd., Li's Singapore-listed holding company, had agreed to sell their PCCW stake to investors including Spain's Telefonica SA.

``China Netcom still wants to work with Telefonica'' to gain control of PCCW, Allan Ng, an analyst at Bank of China International in Hong Kong, said today by telephone. Ng has a ``underperform'' rating on the shares. ``Future growth for PCCW is in China, not in Hong Kong,'' he said.

Buying Shares

Li bought 11.34 million PCCW shares at an average price of HK$4.777 a piece on Dec. 4, according to the statement. On Dec. 1, he bought 41 million shares at an average price of HK$4.841, according to an earlier statement.

The stock rose 0.8 percent in Hong Kong to HK$4.89 as of the 12:30 p.m. break, after gaining 0.8 percent yesterday to HK$4.85. PCCW shares have risen 2 percent this year, compared with a 28 percent increase for the Hang Seng Index.

Calls to Li Tao, a Beijing-based spokesman for China Netcom, went unanswered.

``We are PCCW's second-largest shareholder and we have no plans to change that,'' Zuo Xunsheng, chief executive of China Netcom Group Corp. (Hong Kong) Ltd., China Network Communications' Hong Kong-listed unit, told reporters yesterday. ``We will continue our responsibility as a shareholder.''

China Netcom currently has a 20 percent share of the Hong Kong company. The Beijing-based fixed-line company had planned to pool its stake in PCCW with that of Telefonica if the sale had gone through. Shares of China Netcom fell 0.1 percent to HK$17.14 in Hong Kong as of 12:30 p.m. The stock has risen 36 percent this year.

Convertible Bonds

PCCW had set aside HK$4.3 billion in cash by the end of June to redeem the $450 million of convertible bonds due January 2007, according to the company's interim report for the first six months of this year. It didn't say at what price per share the bonds could be converted into stock.

Pacific Century yesterday paid $173.9 million to redeem $150 million of bonds convertible to PCCW shares held by American International Group. The bonds could have been converted to about a 3 percent stake in PCCW, said Kelvin Ho, an analyst with Nomura Securities in Hong Kong.

``Redeeming those bonds was definitely a defensive move by Richard Li,'' Ho said today by telephone.

Li also bought 28.167 million shares of Pacific Century on Dec. 1 at an average price of 37.04 Singapore cents each, according to a filing to the Singapore Stock Exchange yesterday. He boosted his holding in the company to 76 percent from 75 percent.

The stock was unchanged at 36.50 Singapore cents as of 12:30 p.m. in Singapore.

Pacific Century shareholders rejected a plan on Nov. 30 to sell the company's PCCW stake to a group of investors led by former Citigroup Inc. banker Francis Leung. The potential buyers had offered HK$6 a share for a 22.7 percent stake in PCCW, 8.1 percent more than its closing price before the bid. Li Ka-shing, 78, helped fund the offer, together with Telefonica, Spain's largest phone company.

Leung's group included Li Ka-shing's Hong Kong and Canadian charity foundations, which offered to buy 12 percent. Telefonica targeted 8 percent and former Citigroup banker Leung would have kept 2.7 percent, funded in part by Li Ka-shing.

To contact the reporter on this story: John Liu in Hong Kong at jliu42@bloomberg.net

Last Updated: December 7, 2006 00:14 EST