Australia's Telstra acquires Pacnet for $697 mn

Australia's largest telecommunications company Telstra Corp has agreed to buy Asian telecommunications and services provider Pacnet Ltd for $697 million (A$858 million) aiming to become a leader in Asian service provider market.

Pacnet, which is based in Singapore and Hong Kong, is a provider of connectivity, managed services and data centre services to carriers, multinational corporations and governments in the Asia-Pacific region.

The acquisition includes Pacnet's China joint venture, PBS China, which operates a domestic internet protocol, virtual private network and provides data centre services in most major provinces in China.

Telstra chief executive officer David Thodey said the acquisition was aligned to Telstra's growth strategy and was a significant step for Telstra as it continued to expand the business beyond Australia.

''Asia is an important part of our growth strategy. We believe this acquisition will help us become a leading provider of enterprise services to multinational companies and carriers in the region,'' Thodey said.

''The enterprise services market is evolving rapidly and Pacnet will strengthen our networks; data centres and submarine network as well as boosting our service offerings and people capabilities,'' he added.

Pacnet has 25 offices spread over Australia, China, India, Indonesia, Japan, South Korea, Malaysia, the Netherlands, Philippines, Taiwan, Thailand, the UK, and the US, and around 815 employees.

Pacnet is owned by a private investor group comprising London-based Ashmore Investment Management Ltd and Spinnaker Capital Ltd, and New York-based Clearwater Capital Partners, all focused on investments in Asian emerging markets.

In the year ended December 2013 Pacnet generated revenues of $472m and earnings before interest, tax, depreciation and amortisation (EBITDA) of $111m.

The acquisition will enable Telstra to gain access to Pacnet's extensive range of services, including software defined networking, an expanded data centre network, more submarine cables and major customers across the region.

''For Australian businesses, businesses across Asia and importantly companies looking to expand and grow in Asia, the combined entity will provide powerful new options for networks and services,'' Thodey said.

Through the purchase, the Australian telecom giant will get ownership of more than 46,000 kilometers of submarine cable from Asia to the US and a network of 109 points-of-presence (PoPs) across 61 cities in the Asia-Pacific region and 8 cities in the US and Europe.

Melbourne-based Telstra's Global Enterprise and Services (GES) business in Asia would almost double in size and it is expected to drive operational and cost synergies.

Pacnet chief executive officer Carl Grivner said: "The addition of Pacnet's subsea fibre network, data centre assets, capability in China, and dedicated employee base to Telstra's world-class infrastructure and management will give it the ability to accelerate business growth in the region.''

The transaction includes gross debt of about $400 million and is expected close by mid-2015, subject to regulatory approvals and Pacnet financier approvals.

According to Bloomberg data, Telstra has sold $2.8 billion of assets in the past year, including Hong Kong wireless carrier CSL New World Mobility Ltd. and a domestic directory business.