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PCCW, Telstra cable deal HK`s Pacific Century CyberWorks, Australian telecom co. to invest $4B October 16, 2000: 6:22 a.m. ET HONG KONG (Reuters) - Internet and telecom group Pacific Century CyberWorks and its Australian partner Telstra Corp. will invest up to $4 billion to build a global broadband cable network, a source close to the Hong Kong company said on Monday. The network, which would initially span Asia, North America and Europe, would be the first major project undertaken by the two companies` Internet protocol (IP) backbone joint venture, which would be the controlling shareholder in the network, the source said. PCCW and Telstra`s planned investment was "pretty close" to $4 billion, said the source, adding that the deal could be announced at any time. PCCW spokeswoman Joan Wagner declined to comment on the proposed network, reported in several newspapers on Monday, but said: "It`s always been our plan with the regional backbone company and the Telstra alliance to go global." The Financial Times newspaper said on Monday the firms` IP backbone joint venture would raise $2 billion in debt, of which $1.5 billion would be paid to the controlling partners and $500 million invested in the new network. The newspaper said the proposed new network would probably seek partnerships in the network`s initial phase with three regional carriers in Europe, up to four in the United States and eight in Southeast Asia. PCCW dismissed speculation it was in talks with Japan`s Nippon Telegraph & Telephone Corp. The network would have a capacity of more than 2.5 terabytes a second and be operational by 2002, the Financial Times said. The two companies said last week they had agreed to revise the terms of a US$3.56-billion alliance, which embraces the IP backbone company, a regional mobile-phone joint venture and an Internet data centre. Going global Analysts in Hong Kong said a global undersea cable network would help PCCW take its existing telecom infrastructure assets, which it acquired in by buying dominant Hong Kong telecom provider Cable & Wireless HKT, onto a worldwide stage. "The whole deal with Telstra helped PCCW take its networking assets, which on a stand-alone basis were Hong Kong-centric and losing out to the global players, and put them into a type of venture that has global potential," said Jonathan Shaw, a telecom analyst at Bear Stearns. Analysts said the PCCW-Telstra cable network would be competing with other undersea cable operators such as U.S.-based Level 3 Communications Inc., Global Crossing Ltd. and a regional network under development by rival Singapore Telecommunications. "There`s a lot of overlap in this space," said Rajeev Gupta, an Internet analyst at Goldman Sachs. "(But) with HKT and the Telstra deal having been closed, PCCW is very well equipped and in a very good position to compete." PCCW shares on Monday fell 5.9 percent to HK$7.20, tumbling from a high of HK$8.50 earlier in the session. The stock was the most actively traded in Hong Kong, accounting for turnover of HK$1.31 billion (168.16 million) out of the market`s total of HK$8.81 billion. Telstra`s ordinary shares ended up 1.8 percent at 6.06 Australian dollars. Brokers said investors were jittery about PCCW`s decision to cede a 60 percent controlling stake in its mobile-phone joint venture to Telstra to salvage their alliance, which had come under pressure because of PCCW`s falling share price. |
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