Australian telecom Telstra Corp. Ltd. on Tuesday, Dec. 23, agreed to buy Asian undersea cable and Internet infrastructure operator Pacnet Ltd. for $697 million in cash and debt to continue its Asian expansion.
Melbourne-based Telstra said the deal includes the assumption of about $400 million in debt as it buys Pacnet from financial investors including Ashmore Investment Management, Spinnaker Capital and Clearwater Capital Partners.
"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," said Telstra CEO David Thodey in a statement.
Telstra is working to hand over the Australian fixed-line network that is a legacy of its former monopoly on phone services. The government hopes to spur competition and improve Internet service by building and leasing a nationwide, fiber-optic network using Telstra's network, which was valued at A$11 billion ($7.3 billion) in a Dec. 14 agreement with the government.
Pacnet will give Telstra access to a number of undersea cables carrying data and voice traffic throughout Asia and to the U.S. The deal will also give it Pacnet's Internet routing centers in 61 Asian cities as well as a handful in the U.S. and Europe. Telstra will also gain the right to provide Internet services to every province in China through the target's PBS venture.
Last year Pacnet, with headquarters in both Hong Kong and Singapore, had sales of $472 million and Ebitda of $11 million.
Pacnet's owners put the company up for sale early this summer and Telstra disclosed talks earlier this month. The auction also attracted China's Citic Telecom International Holdings Ltd. but the sellers failed to reach their reported asking price of $1 billion including debt.