Australian incumbent Telstra has agreed to sell its Hong Kong mobile operator CSL back to the owner of smaller rival HKT, which will reduce the number of players in the city’s saturated market.
The total deal value is US$2.42bn, with Telstra expecting…
Australian incumbent Telstra has agreed to sell its Hong Kong mobile operator CSL back to the owner of smaller rival HKT, which will reduce the number of players in the city’s saturated market.
The total deal value is US$2.42bn, with Telstra expecting to receive proceeds of around A$2bn (US$1.85bn) for its 76.4% stake in the company.
HKT, owned by telecoms group PCCW, will buy the remaining 23.6% held by New World Development, a local conglomerate, for US$572m.
Commenting on the rationale behind the deal in a statement, Telstra CEO David Thodey said: “CSL has been a strongly performing business, the compound annual revenue growth rate was 9.4% over the last three years and we have gained market share… However, there are a number of dynamics in the Hong Kong mobile market that mean this is the right opportunity for Telstra to maximise our return on this successful asset.”
Once completed, the deal will consolidate the Hong Kong market from five to four players. The combined HKT/CSL operator is estimated to have a 31% market share, PCCW said. Mobile penetration in the city is over 200%.
PCCW, owned by billionaire Richard Li, said in a stock exchange filing it plans to fund the transaction using a commercial banking facility of up to US$2.5bn with tenure of 18 months.
This deal comes just over 10 years after Telstra bought CSL from PCCW for US$2.3bn.
The Australian telco said that Asia remains an important part of its strategy, pointing to its increased stake in Autohome, an “online destination for automobile consumers in China”.
Telstra expects a profit on the sale of CSL to reach A$600m, the net proceeds of which will be incremental to its free cashflow guidance of A$4.6bn to A$5.1bn in FY14.
Alex Arena, group managing director of HKT, said in a separate statement: “We are pleased to be able to make a proposal to bring [CSL] back into the HKT family. This transaction will enable us to grow HKT and also enable us to provide better service to customers of both HKT and [CSL].”
HKT said it believes that the deal, subject to regulatory approval, does not raise significant competition concerns. It has however offered some pro-competition measures, including returning to the government an additional 2×5 MHz of 3G spectrum when licences expire in 2016. HKT has also offered to not participate in the bidding for 3G spectrum to be returned by itself or other operators.