An internet start-up company has won the battle for control of Cable & Wireless HKT, Hong Kong's leading telephone company.

Pacific Century Cyberworks is now one of Asia's largest telecoms and technology companies, after one of the continent's biggest corporate takeovers.

The internet investment company offered $38 billion in shares for the company, defeating rival bidder Singapore Telecom.

Tycoon takeover

Pacific Century CyberWorks is controlled by 33-year-old Richard Li, the son of tycoon Li Ka-Shing.

His offer for the company has been accepted by its UK parent, Cable and Wireless, which will reduce its 54% stake in its Hong Kong subsidiary to about 20%.

Richard Li and his associates will hold about 37% in the new company, which will be called PCCW-HKT.

The new company will have a market capitalisation of about $70bn and will be an Asian internet, multimedia and telecoms giant, group managing director Alex Arena said.

Singapore Telecom's bid

The failure of the Singapore Telecom bid is attributed by some commentators to behind the scenes intervention from the Chinese government, which indirectly own a 10% stake in the company.

The Chinese government are thought to have been reluctant for the company to fall into Singaporean hands.

A successful takeover by the Singaporean company would have made it a dominant regional player - a prospect which caused some concern in Hong Kong because of the fierce competition between the two cities.

Singapore Telecom withdrew from the fight shortly before the announcement.

It abandoned last minute plans to form a joint venture with Rupert Murdoch's News Corporation to bid for the company.

Internet boom

The deal highlights the huge buying power that internet companies have as a result of their soaring share prices.

"Here is a company that wasn't even around a year ago now taking over one of the giants of Hong Kong," Dwayne Taylor, an analyst at Robert Fleming Securities, said.

The Chinese government's ownership of a stake in the company should also help it gain a foothold in China.

Spotlight on UK company

The deal has given Cable & Wireless in the UK plenty of cash to make acquisitions.

Some commentators suggest that Cable & Wireless may now be a bid target.

It has previously attracted interest from Deutsche Telekom and British Telecom.