STOCKWATCH: PCCW -- 2 (no upside seen; need to sell assets and cut debt)

At 11:51 am, PCCW was down 0.15 at 3.10 on 40.986 mln shares.	    The Hang Seng index was up 83.25 points at 12,761.14.	    The local brokerage analyst said PCCW must have obtained approval from the stock exchange before deciding to write off against reserves the 22 bln usd in goodwill related to its acquisition of Cable & Wireless HKT last year.	    "PCCW initially must have thought that writing off the goodwill from reserves was a pure accounting treatment. 	    "However press reports in the last two days have been emphasising the negative equity and headline numbers," leading retail investors to sell down the stock, he said.	    He said analysts are more concerned about the repayment of principal on PCCW's re-financing debt, which starts in 2003.	    "We are concerned about its future prospects, debt reduction, interest expense payments... among others."	    He said PCCW will have to pay more than 3 bln hkd a year in the next two years in interest expense.	    Even the traditional businesses of HKT are "not at all exciting," he said.	    "If it was exciting and there were growth prospects, they would definitely tell us about it .... there is nothing to tell here," he said.	    "In addition, all the company's major business units are facing competition. IDD tariffs are down considerably.	    "Although its wholesale international broadband bandwidth has increased, overall market supply has also grown and tariffs have fallen by more than 40 pct last year."	    He said even if the wholesale volume offsets any tariff falls, at most one should see flat growth with almost no upside coming from this unit.	    "The local fixed line network is holding its ground but there will be further deregulation in mid-2003 and how is the network going to hold up?"	    Concerns over Cable & Wireless' 15 pct stake in the company will continue to lend volatility to the stock, the analyst said.	    C&W is currently allowed to sell a stake of 7.5 pct, and will be allowed to dispose of the remaining 7.5 pct from August this year.	    "If C&W sees what we see ... that there is no further upside (in PCCW shares), then they would consider selling now and getting cash rather than waiting," he said.	    Although the analyst puts a 3.50 hkd fair value on PCCW shares, he said with no upside on the stock, "what is the point of buying the shares?"	    He is calling a trading sell on PCCW as "the stock doesn't deserve a buy recommendation." 	    "The near-term driver will be if they sell more assets and reduce debts," he said.	    There is market speculation that the company is in talks to sell its office tower in Quarry Bay for 2 bln hkd, the analyst said.	    "They need the cash to resolve their debt problems and they should be moving to CyberPort in a few years when it is ready anyway," he said.    

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