ADIA, CIC eye PCCW fibre asset
Sovereign wealth funds Abu Dhabi Investment Authority (ADIA) and China Investment Corporation (CIC) are among the parties that have shown interest in a minority stake in the fibre asset owned by Hong Kong-based PCCW Limited [HKG: 0008], TMT Finance has learnt. PCCW owns local telco HKT Trust & HKT LTD [HKG: 6823].
As previously reported, PCCW is working with Deutsche Bank on its fibre review and search for potential investors.
Sources recently said that the sellside is targeting a narrow group of parties as potential investors and has held bilateral discussions with them. Among them are ADIA and CIC, sources said, adding that sovereign wealth fund Mubadala Investment Company could also be there.
PCCW is selling a 40% stake in the fibre asset and the deal value for the potential investment is between US$500m and US$1bn, sources continued.
It is not yet clear what specific fibre asset PCCW would include into the sale. However, the asset involved has EBITDA of between HK$1.2bn and HK$1.3bn (US$153.7m-US$166.5m), sources mentioned.
Non-binding bids are due this month and some parties could have already submitted bids, sources added.
The development comes after TMT Finance exclusively reported in July that PCCW was reviewing its fibre assets and outcomes could include a potential carveout and a subsequent stake sale. In October, sources said that the telco had reached out to potential investors, testing market appetite for the fibre asset, with Chinese and Middle East-based investors having been approached.
PCCW is a holding company with interests in telecommunications, media, IT, property development and investment, among other businesses. Its HKT unit— one of Hong Kong’s major operators in fixed-line, broadband, mobile communication, and media entertainment services — is a broadband service provider with fibre network and 5G wireless-to-the-home technology, according to PCCW.
HKT’s technology, telecommunications and related services are under its Telecommunications Services (TSS) segment which includes enterprise solutions, total home solutions, healthtech services, and media entertainment. It operates primarily in Hong Kong, but also serves customers in mainland China and elsewhere.
HKT also has a mobile services business operated through its CSL Mobile subsidiary. CSL Mobile operates a 5G network through the csl and 1O1O mobile service brands. The 5G network is backed by HKT’s holding of 5G spectrum across all bands and of extensive fibre backhaul infrastructure.
PCCW Global, HKT’s international operating division, operates a Tier-1 global Internet backbone network and the Console Connect Software Defined Interconnection platform. Console Connect — which can be accessed from close to 600 datacentres in more than 55 countries — was sold to New Zealand-based infrastructure investment firm Infratil [NZE: IFT] earlier this year.
According to HKT’s 2023 interim report, the TSS segment’s revenue as of June 30, 2023, grew by 1% yoy to HK$11.68bn (US$1.5bn). Total TSS EBITDA for that period increased by 3% yoy to HK$4.22bn with an improved margin of 36%.
On a consolidated basis, HKT’s total revenue, excluding mobile product sales, for the six months ending June 30, 2023, increased by 3% yoy to HK$15.25bn. The total revenue increased by 2% yoy to HK$16.4bn, the report showed.
Broadband revenue increased by 2% yoy, spurred by the further uptake of fibre connectivity and value-added services such as home Wi-Fi solutions.
According to HKT’s FY2022 annual report, as part of the TSS segment, the broadband business achieved an overall net gain in customers, with total broadband access lines at 1.64 million as of end December 2022. Of these, 969,000 were FTTH connections, which represented a net increase of 25,000 or 3% growth from a year earlier, and a 66% growth in consumer broadband lines.
Wi-Fi solutions penetration also continued to rise, which helped lift overall ARPU, HKT noted in the annual report. As of year-end, a total of 346,000 customers had subscribed to the home Wi-Fi solutions, up 4% from the previous year and representing 24% of the consumer broadband base. The consumer broadband subscriber base registered a net gain of about 4,000 to reach 1.465 million in 2022.
PCCW, HKT, ADIA, CIC and Mubadala did not respond to requests for comment.
