CyberWorks announced the then-unnamed 1 CyberNetwork (1CN) project in October as a possible venture with Telstra Corp, Australia's largest phone company, and unidentified others. Telstra said last month it had backed out, as the investment "wasn't appropriate."
The delay by CyberWorks may be a sign that other fiber-optic projects announced worldwide may not materialize because usage charges for the links are expected to fall by as much as half during the next two years as new cables are laid.
"As of today, looking at our forecast and the cable systems which are available, we decided to put the 1CN project on hold," said Keith Harrison, managing director of Global Communications Services of CyberWorks.
Harrison said capacity from other systems will only meet the world's short-term needs, and the company may restart the cable network project in future.
Harrison wouldn't say if one reason for the postponement was concern about borrowing money to pay for the project. A skid in global telecom stocks has made banks increasingly cautious about lending to phone projects.
"Funding difficulty must be a reason for the delay," said David Loo, investment adviser at Coutts Bank (Schweiz) AG in Hong Kong, which owns CyberWorks shares. "The delay's prudent given the uncertain future return."
Reach Ltd, another cable joint venture between Telstra and CyberWorks, also faces falling rates as new cables being laid by Global Crossing Ltd and Level 3 Communications Inc create an oversupply in broadband capacity, analysts said.
"As a latecomer, I doubt CyberWorks can take on two major competitors without a price cut," Loo said. He said the company should focus on shaping up its balance sheet and avoid major investments in the next one to two years.
In November, CyberWorks told bankers higher traffic will more than make up for falling prices of bandwidth, and that earnings before interest, taxes, depreciation and amortization of its half-owned cable venture would rise 1.4 percent this year to US$506 million, rising to US$1.4 billion in 2007.
CyberWorks shares have fallen 43 percent since it made public its ambition to build an international cable system with others in October. The stock declined 1.8 percent to HK$4 today.
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