"The fund will be owned by Tian personally and he will leave PCCW and China Netcom soon," said a source close to Tian. "It's time for [Tian] to leave [to set up his own business] because of his entrepreneurship."

Tian, also chief executive of China Netcom Group Corp, was regarded as the middle man who helped Netcom buy a stake in PCCW for US$1 billion in January 2005.

PCCW's investment will make up about half the fund's start-up capital. The fund will raise between US$200 million to US$300 million, sources said.

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Apart from PCCW, some well- known investors, including China Netcom Group, media tycoon Rupert Murdoch and people linked to Jiang Mianheng, son of former president Jiang Zemin, will join the new fund later, market sources said.

"Tian is a leading figure in the telecommunications, media and technology sector in China ... and we could see the fund provide an attractive means of investing in the above sectors in the long term," PCCW said. "[We are] seeking to realize substantial long-term capital appreciation from the investment."

PCCW, facing keen competition in Hong Kong, aims to expand in the mainland. It has teamed up with China Netcom to set up a "China business development committee," which plans to invest up to HK$5 billion.

PCCW said Wednesday net profit rose 2.5 percent to HK$1.59 billion in 2005 from HK$1.56 billion in 2004. PCCW's shares fell 0.98 percent, closing at HK$5.05 Friday. The stock has gained 5.76 percent this year, compared to the 6.24 percent gain in the benchmark Hang Seng Index.