UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PCCW LIMITED
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(Name of Issuer)
Ordinary Shares, par value HK$0.25
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(Title of Class of Securities)
70454G207
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(CUSIP Number)
Luo Gang
Building C, 156, Fuxingmennei Street, Beijing, 100031, China
Tel: 86-10-66169571
Fax: 86-10-66110009
Copy to:
Gregory G.H. Miao
Skadden, Arps, Slate, Meagher & Flom LLP
30/F Tower Two, Lippo Center
89 Queensway
Hong Kong
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 1, 2005
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or
240.13d-1(g), check the following box. [ ]
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See ss.240.13d-7 for
other parties to whom copies are to be sent.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities that
section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
Persons who respond to the collection of information contained in this
form are not required to respond unless the form displays a currently
valid OMB control number.
CUSP No. 70454G207
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1. Names of Reporting Persons
I.R.S. Identification Nos. of above persons (entities only).
China Network Communications Group Corporation ...........
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a)..................................................................
(b) x................................................................
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3. SEC Use Only ........................................................
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4. Source of Funds (see Instructions) BK and WC........................
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5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) ..................................................
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6. Citizenship or Place of Organization ................................
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People's Republic of China
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Number of 7. Sole Voting Power 1,343,571,766................
Shares Bene- ---------------------------------------------------------
ficially by 8. Shared Voting Power 1,714,784,411..............
Owned by ---------------------------------------------------------
Each 9. Sole Dispositive Power 1,343,571,766...........
Reporting ---------------------------------------------------------
Person With 10. Shared Dispositive Power 1,714,784,411.........
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
3,058,356,177* ......................................................
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12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions) ...........................................
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13. Percent of Class Represented by Amount in Row (11) 45.5%.............
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14. Type of Reporting Person (See Instructions)
CO...................................................................
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* Except as set forth in Item 6, the Reporting Person disclaims beneficial
ownership of any Shares held by the Substantial Shareholders.
Item 1. Security and Issuer
This schedule relates to ordinary shares, par value HK$0.25, of PCCW Limited
("Shares"). PCCW Limited (the "Issuer") is a company incorporated in Hong Kong
with limited liability with a registered office at 39th Floor, PCCW Tower,
Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong.
Item 2. Identity and Background
(a) This schedule is filed by China Network Communications Group Corporation
(the "Reporting Person"), a state-owned enterprise established under the laws
of the People's Republic of China ("PRC"). As a state-owned enterprise
established in the PRC, the Reporting Person does not have a board of
directors. The Reporting Person's executive officers (the "Officers") are Mr.
Zhang Chunjiang (the President of the Reporting Person), Mr. Tian Suning, Mr.
Zuo Xunsheng, Mr. Pei Aihua, Mr. Zhang Changsheng, Mr. Zhao Jidong and Mr.
Zhang Xiaotie (each a Vice President of the Reporting Person).
(b) The business address for the Reporting Person and each Officer is Building
C, 156, Fuxingmennei Street, Beijing, 100031, China.
(c) The Reporting Person is a state-owned enterprise established in the PRC.
The principal activities of the Reporting Person are (i) the ownership of
approximately 70.5% interest in China Netcom Group Corporation (Hong Kong)
Limited (which is a company incorporated in Hong Kong whose shares are listed
and traded on the Hong Kong Stock Exchange and the New York Stock Exchange, and
which is a leading fixed-line telecommunications operator in the PRC and a
leading international data communications operator in the Asia Pacific region)
and (ii) the ownership of fixed-line telecommunications networks which are
outside of the northern and southern service regions of the networks operated
by China Netcom Group Corporation (Hong Kong) Limited and the Reporting Person
provides telecommunications services using those networks. Each Officer is
principally employed by the Reporting Person.
(d) Neither the Reporting Person nor any Officer has been convicted in a
criminal proceeding during the last five years.
(e) During the past five years neither the Reporting Person nor any Officer has
been a party to a civil proceeding that resulted in a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws of finding any violation with
respect to such laws.
(f) The Reporting Person is a state-owned enterprise established in the PRC and
each of the Officers is a citizen of the PRC.
Item 3. Source and Amount of Funds or Other Consideration
Pursuant to a Subscription Agreement dated January 19, 2005 (the "Subscription
Agreement") among the Issuer, the Reporting Person and China Netcom Group
Corporation (BVI) Limited, a whole-owned subsidiary of the Reporting Person
(the "Subscriber"), the Subscriber conditionally agreed to subscribe for
1,343,571,766 new Shares, par value HK$0.25, at a price of HK$5.90 per share
(the "Subscribed Shares"), representing approximately 25% of the Issuer's
then-issued share capital and approximately 20% of the Issuer's issued share
capital as enlarged by the allotment and issuance of the Subscribed Shares.
The Reporting Person paid an aggregate subscription price of approximately US$1
billion for the Subscribed Shares upon the completion of the subscription on
April 1, 2005 ("Completion"). Approximately 20% of the subscription price was
paid from the Reporting Person's working capital and the rest of the
subscription price was paid from US$800 million borrowed by the Reporting
Person from four banks pursuant to loans made in the ordinary course of the
business of the lending banks. The Reporting Person entered into (i) a Foreign
Currency Loan Facility dated March 17, 2005 with China Construction Bank,
Beijing Branch, Qianmen Sub-branch, pursuant to which the Reporting Person
borrowed US$150 million at an annual interest rate of USD 6-month LIBOR plus
0.9%, due March 16, 2010, (ii) a Loan Agreement dated March 17, 2005 with
Communications Bank, Beijing Branch, pursuant to which the Reporting Person
borrowed US$150 million at an annual interest rate of USD 6-month LIBOR plus
0.8%, due March 17, 2008 and (iii) a Loan Agreement dated March 14, 2005 with
Bank of China Limited and Bank of China (Hong Kong) Limited, Shanghai Branch,
pursuant to which the Reporting Person borrowed US$300 million from Bank of
China Limited and US$200 million from Bank of China Corporation (Hong Kong)
Limited, Shanghai Branch, both at an annual interest rate of USD 3-month LIBOR
plus 0.8%, and half of the each amount borrowed from each of the two banks is
due on March 17, 2009 and the other half on March 17, 2010 (collectively, the
"Loan Agreements").
Translations of the Loan Agreements are attached as Exhibits 1, 2 and 3.
Item 4. Purpose of Transaction
The Subscribed Shares have been acquired for strategic investment purposes. The
Reporting Person intends to review its holdings on a continuing basis and
retains the right to change its investment intent at any time. Depending on its
evaluation of the Issuer's business and prospects, and on future developments
including, but not limited to, performance of the Shares in the market,
availability of funds, alternative uses of funds, stock market and general
economic conditions and other factors that the Reporting Person may deem
relevant to its investment decision, the Reporting Person may acquire
additional Shares, sell all or a portion of the Subscribed Shares, or maintain
its position at its current level. Any such additional purchases or sales of
the Shares may be in open-market or privately-negotiated transactions, or
otherwise.
Pursuant to the Subscription Agreement, the Reporting Person will be entitled
to subscribe for additional Shares, securities convertible or exchangeable into
Shares and/or any warrants or other rights to subscribe for Shares in order to
maintain its percentage shareholding as a result of equity or equity linked
capital issuance (the "Reporting Person's Anti-Dilution Rights"). The prices
and terms upon which the Reporting Person will be entitled to subscribe for
such additional Shares, warrants or other rights will be the same as such
equity or equity linked capital issuance are offered or made to third parties.
The term of the Reporting Person's Anti-Dilution Rights will be for three years
from the Completion. If the Subscriber ceases to hold directly or indirectly at
least 15% of the issued share capital of the Issuer or the Reporting Person
ceases to hold at least 75% of the issued share capital of the Subscriber at
any time during this period, the Reporting Person's Anti-Dilution Rights will
terminate.
Pursuant to the Subscription Agreement, Mr. Zhang Chunjiang, Dr. Tian Suning
and Dr. Fan Xingcha have been nominated as non-Executive Directors of the
Issuer by the Reporting Person and appointed to the Board of Directors of the
Issuer at Completion. Mr. Zhang, Dr. Tian and Dr. Fan have also been appointed
to a number of committees of the Board of Directors of the Issuer with effect
from April 1, 2005. Mr. Zhang Chunjiang has been appointed as a member of the
Nomination Committee and the Regulatory Compliance Committee. Dr. Tian Suning
has been appointed as a Deputy Chairman of the Board and a member of the
Executive Committee and the Remuneration Committee. Dr. Fan Xingcha has been
appointed as a member of the Finance and Management Committee. The Reporting
Person has the right to nominate persons from time to time to replace any of
these appointees.
Furthermore, pursuant to the Subscription Agreement, upon the Issuer's business
operations in the PRC becoming a substantial part of the operations of the
Issuer and its subsidiaries (the "Group"), the Reporting Person shall have the
right to nominate one of its nominees on the Board of the Issuer to be a
Co-Group Managing Director, subject to the nominee having requisite
qualifications and experience and subject to the approval of the Board.
Except as set forth herein, neither the Reporting Person nor any Officer has
any plans or proposals which would relate to or result in any of the
transactions described in subparagraphs (a) through (j) of Item 4 of Schedule
13D.
The Subscription Agreement is attached as Exhibit 4 and is incorporated in and
made part of this schedule in its entirety by this reference.
Item 5. Interest in Securities of the Issuer
(a) As of April 1, 2005, the Reporting Person beneficially owns 1,343,571,766
Shares, or 20% of the Shares outstanding (based on 6,717,891,827 Shares which
is the total Shares outstanding according to information provided by the
Issuer). The Reporting Person may be deemed to beneficially own 1,714,784,411
Shares held by the Substantial Shareholders (as defined below), or 25.5% of the
Shares outstanding, pursuant to the Shareholders Agreements entered into by the
Reporting Person and the Substantial Shareholders and described in Item 6
below. Except as set forth in Item 6, the Reporting Person disclaims beneficial
ownership of any Shares held by the Substantial Shareholders. The Officers do
not own any Issuer securities.
(b) The Reporting Person exercises sole power to vote or dispose of the
1,343,571,766 Shares that it beneficially owns. Pursuant to the Shareholders
Agreements entered into by the Reporting Person and the Substantial
Shareholders and described in Item 6 below, the Reporting Person may be deemed
to share the power to vote or dispose of 1,714,784,411 Shares held by the
Substantial Shareholders. Except as set forth in Item 6, the Reporting Person
disclaims beneficial ownership of any Shares held by the Substantial
Shareholders. The Officers do not have sole or shared voting or disparities
power over any Shares.
(c) On January 19, 2005, the Issuer entered into a Anti-Dilution Agreement with
each of Pacific Century Regional Developments Limited, a company incorporated
in Singapore with limited liability and a shareholder of the Issuer ("PCRD"),
Pacific Century Diversified Limited, a company incorporated in the Cayman
Islands with limited liability and a shareholder of the Issuer ("PCD"), and
Pacific Century Group Holdings Limited, a company incorporated in the British
Virgin Islands with limited liability and a shareholder of the Issuer (together
with PCRD and PCD, the "Substantial Shareholders"), which granted each of the
Substantial Shareholders certain anti-dilution rights that were substantially
similar to the Reporting Person's Anti-Dilution Rights (the "Substantial
Shareholders' Anti-Dilution Rights"). On February 7, 2005, the Issuer, the
Reporting Person, the Subscriber and the Substantial Shareholders reached an
agreement whereby the Substantial Shareholders agreed to terminate the
Substantial Shareholders' Anti-Dilution Rights. The parties to the Subscription
Agreement then entered into a Supplemental Agreement to remove the condition to
Completion in the Subscription Agreement that the Substantial Shareholders'
Anti-Dilution Rights be approved at an extraordinary general meeting of the
Issuer.
In accordance with clause 4.4 of the Subscription Agreement, which entitles the
Subscriber to assign all of its rights under the Subscription Agreement to a
company that is wholly-owned by the Subscriber, the Subscriber has assigned all
its rights, title and interest in, to and under the Subscription Agreement to
China Netcom Corporation (BVI) Limited (the "Alternate Subscriber") by entering
into a Deed of Assignment dated March 14, 2005 among the Issuer, the Reporting
Person, the Subscriber and the Alternate Subscriber.
The Supplemental Agreement and Deed of Assignment are attached as Exhibits 5
and 6 and are incorporated in and made part of this schedule in their entirety
by this reference.
Except as set forth in this schedule, neither the Reporting Person nor any
Officer has effected any transactions in the Shares during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
On January 19, 2005, the Reporting Person entered into a Shareholders'
Agreement with each of the Substantial Shareholders (collectively, the
"Shareholders Agreements", and each, a "Shareholders Agreement"). The terms of
each Shareholders Agreement are substantially similar and are described below.
Pursuant to the Shareholders Agreements, subject to certain customary
exceptions, each Substantial Shareholder is subject to (i) an initial lock-in
period commencing on the date of the Shareholders Agreements and ending on the
date of Completion and (ii) a further lock-in period of 12 months from the date
of Completion. The further lock-in period is conditional upon Completion. The
Reporting Person may waive the lock-in in whole or in part. Each Substantial
Shareholder has also undertaken to exercise its rights and powers and give all
such instructions (including as a shareholder of the Issuer) to procure, so far
as it is able, that the Issuer's obligations in connection with the Reporting
Person's entitlements to nominate Board members and committee members are
complied with from time to time for so long as the Reporting Person is entitled
to exercise such rights in accordance with the Subscription Agreement.
The Shareholders Agreements are attached as Exhibits 7, 8 and 9 and are
incorporated in and made part of this schedule in their entirety by this
reference.
Item 7. Material to Be Filed as Exhibits
Exhibit 1: Foreign Currency Loan Facility dated March 17, 2005 between
China Network Communications Group Corporation and China
Construction Bank, Beijing Branch, Qianmen Sub-branch
(English translation)
Exhibit 2: Loan Agreement dated March 17, 2005 between China Network
Communications Group Corporation and Communications Bank,
Beijing Branch (English translation)
Exhibit 3: Loan Agreement dated March 14, 2005 among China Network
Communications Group Corporation, Bank of China Limited and
Bank of China (Hong Kong) Limited, Shanghai Branch (English
translation)
Exhibit 4: Subscription Agreement dated January 19, 2005 among PCCW
Limited, China Network Communications Group Corporation
and China Netcom Group Corporation (BVI) Limited
Exhibit 5: Supplemental Agreement dated February 7, 2005 among PCCW
Limited, China Network Communications Group Corporation and
China Netcom Group Corporation (BVI) Limited
Exhibit 6: Deed of Assignment dated March 14, 2005 among PCCW Limited,
China Network Communications Group Corporation, China
Netcom Group Corporation (BVI) Limited and China Netcom
Corporation (BVI) Limited
Exhibit 7: Shareholders' Agreement dated January 19, 2005 between
China Network Communications Group Corporation and Pacific
Century Regional Developments Limited
Exhibit 8: Shareholders' Agreement dated January 19, 2005 between China
Network Communications Group Corporation and Pacific
Century Diversified Limited
Exhibit 9: Shareholders' Agreement dated January 19, 2005 between China
Network Communications Group Corporation and Pacific
Century Group Holdings Limited
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated as of April 11, 2005
CHINA NETWORK COMMUNICATIONS GROUP
CORPORATION
By: /s/ Zhang Chunjiang
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Name: Zhang Chunjiang
Title: President