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HONG KONG -- There's nothing like a market crash to alter your priorities: Entrepreneurs start scrambling for cash and the analysts who used to work the phones touting stocks develop a bad case of laryngitis.

Perhaps the biggest question in Asian business today -- prompted by the plunging market -- is whether Hong Kong Internet


Richard Li

can still pull off his stock-and-cash deal to acquire the island's major phone company,

Cable & Wireless HKT


. Back in March, when the preliminary deal was struck, Li promised he wouldn't strip away assets to finance the mammoth $12 billion debt he had to take on to make the transaction go.

Now, with stock in Li's

Pacific Century CyberWorks

down 52% from its February high -- but the stock of his target company down just 39% -- he needs a little insurance that his deal won't buckle. When you own a company that doesn't do any business yet, borrowing $12 billion to buy a company that generates $1 billion a year in cash is quite an achievement. But once the applause dies down, you need to pay the bank.

Enter Australia's part-public, part-private phone company


(TLS) - Get Telos Corporation Report

, which this week agreed to spend $3 billion to help keep Li's deal hopes alive. In exchange for a $1.5 billion investment if the takeover actually happens, Telstra will get 40% of C&W HKT's mobile phone business -- a sale by Li of something he doesn't even own yet. Telstra would then lend Pacific Century another $1.5 billion by buying convertible notes.

Will this help ensure the deal goes through? The market first voted yes, as all three companies involved initially soared. Still, as the

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sank, so did the three Asian companies. Telstra may have its credit rating cut, because its credit would be subordinate to Li's massive bank loan.

Still, Telstra's proposed role "makes it more of a certainty that it will go ahead," said Michael Millar, regional telecom analyst for

SG Securities

. "You'll find very few people who think this deal is not going ahead."

One reason for this is that a good chunk of the analysts in Asia work for firms that have underwriting relationships with one of the three parties to this deal. When markets are going up, analysts confidently tell you that they have no idea whether there are underwriting relationships with companies they watch, given the sturdy "Chinese Walls" erected between investment bankers and analysts, to keep research pure.

But when markets go down, analysts run for cover. Most notable of these is

Merrill Lynch

's Matei Mihalca, recently the subject of an extended

New York Times

profile. On Jan. 18,


wrote about Mihalca's breathless

report targeting a Pacific Century price 56% above its HK$16.00 ($2.05) price at the time. The reasoning was that PCCW was another


and should trade at roughly the same premium to net asset value. (That was after an erroneous report that set the same target price, but on different reasoning: that Pacific Century's market cap should match Softbank's.)

Now that Softbank has fallen more than 50%, does the Pacific Century target price still hold? Mihalca can't say, because Merrill Lynch is advising C&W HKT on Pacific Century's takeover offer, a good deal of which consists of the stock that Mihalca and Merrill said was so valuable. Pacific Century's price today, by the way: HK$13.75, 14% below where Mihalca had it pegged for liftoff three months ago and certainly not good for big institutional holders like

Nicholas-Applegate Capital Management


Kinetics Asset Management


Loomis, Sayles & Co.

If shareholders at C&W HKT's parent company,

Cable & Wireless


decide against Pacific Century's offer in the coming weeks, there is another way out that makes a lot more sense for all involved: a return to the table of

Singapore Telecom

. Singtel initially bid for C&W HKT and was beaten to the punch by Li, but it was clear from

Bank of China's

lead participation in Li's $12 billion loan that Beijing was not interested in having the Singapore government take complete control of Hong Kong's biggest phone company.

"If you get Singtel, Telstra, C&W HKT together, there's a logic to it," said Richard Ferguson, telecom analyst at


in Hong Kong. (Nomura has no underwriting relationship with any of the parties.) That's because Asia's telecom companies may all be big fish at home, but few have major businesses outside their own borders. To compete with the international giants of the telecom world, such as

MCI WorldCom


, said Ferguson, the Asian companies will have to be big.

It could still happen. Singapore Prime Minister Goh Chok Tong was to meet with Li and his even richer tycoon father,

Li Ka-shing

, on a swing through Hong Kong this week. If Messrs. Lis figure the takeover won't happen, and a face-saving deal for everyone -- including Singapore -- is struck, this will be back where it originally started.