PCCW Bets Chinese Global Expansion Will Drive Its Own Growth

PCCW Ltd., the telecommunications conglomerate controlled by billionaire Richard Li, intends to hitch a ride as Chinese corporations expand at home and abroad.

The Hong Kong company expects double-digit revenue growth this year in China from its enterprise solutions business, Group Managing Director B.G. Srinivas said Tuesday.

“China is a huge market,” Srinivas, who joined PCCW a year ago, said in an interview in Hong Kong. “Some of the Chinese enterprises we work with have global ambitions, so they want to work with companies like us.”

Li, younger son of Cheung Kong Holdings Ltd. Chairman Li Ka-shing, is looking for growth beyond its home city of 7 million and telecommunications. The latter business provided almost 86 percent of the company’s sales last year.

Its shares have fallen 22 percent this year as of Tuesday’s close, compared with a 9.9 percent drop in the Hang Seng Index.

Srinivas, former co-president of Indian software provider Infosys Ltd., is betting that Chinese corporations setting up shop abroad will need computing partners.

PCCW’s IT division increased revenue 37 percent in the first half by helping clients with data hosting and other cloud computing needs, competing with Alibaba Group Holding Ltd. and International Business Machines Corp.

It has attracted clients including the country’s second largest lender, China Construction Bank Corp., and the biggest search engine Baidu Inc. The business contributed 7.8 percent of PCCW’s revenue in the first half, from 6.6 percent in the previous six months, according to data compiled by Bloomberg.

The company is exploring acquisitions of Indian-based software firms with U.S. and European clients, a growth strategy Srinivas made public in March.

Depending on the size of investments, PCCW is open to offering debt or seeking partners, he said. It had more than HK$6.9 billion ($890 million) in cash, near cash and short-term investments and total debt of HK$42.2 billion as of June.

The company is also expanding its content business. It agreed to buy a controlling stake in U.S.-based Vuclip to expand its online video business in India and Indonesia, the company said in March.

Vuclip now has 7.5 million subscribers, about 6 million of them in India. Srinivas said he sees Indonesia, Thailand and Malaysia as regions that could provide strong revenue growth.

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