Telstra acquires Pacnet for $US697 million

Telstra acquires Pacnet for $US697 million

The deal includes Pacnet's interests in the China joint venture, PBS,

Telstra will acquire Asian telecommunications and services provider, Pacnet, for $US697 million.

The deal is s subject to completion adjustments. The transaction is subject to regulatory and Pacnet financier approvals and is expected to complete by mid-2015.

Pacnet provides connectivity, managed services and datacentre services to carriers, multinational corporations and governments in the Asia-Pacific region.

The acquisition of the Singapore and Hong Kong headquartered company includes interests in its China joint venture, PBS, which is licensed to operate a domestic Internet Protocol Virtual Private Network and provide data centre services in most major provinces in China.

Pacnet gives Telstra ownership of an extensive range of services including software defined networking (SDN), an expanded datacentre network, more submarine cables and major customers across the region.

The $US697 million acquisition is subject to completion adjustments. The transaction is subject to regulatory and Pacnet financier approvals and is expected to complete by mid-2015.

Telstra CEO, David Thodey, said in a statement 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,” Mr 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.

“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.

“Pacnet increases the scale and scope of our assets which can be used as a platform for Telstra to scale and expand leading solutions such as unified Cloud, unified communications, managed network services and security services.

“Our strategy is centred on serving enterprise and carrier customers doing business in Asia. We serve these customers by leveraging our strong connectivity foundation to offer a portfolio of integrated network applications and services solutions,” he said.

Pacnet CEO, Carl Grivner, said: "The addition of Pacnet’s subsea fibre network, datacentre 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.

“There is a tremendous opportunity for this combination to address the growing demand for services throughout the Asia-Pacific region and provide superior solutions and service to customers,” he said.

In the year ended December 2013 Pacnet generated revenues of $US472m and earnings before interest, tax, depreciation and amortisation (EBITDA) of $US111m.

The combined entity would become a leader in the Asia service provider market. Telstra’s GES business in Asia would almost double in size and it is expected to drive operational and cost synergies.

Telstra backgrounded Pacnet in its statement. All details are as of November 30, 2014

Pacnet is headquartered in both Singapore and Hong Kong and has about 815 employees across 25 offices (including PBS China) located in 24 cities in 11 countries and regions, including Australia, China, Hong Kong, India, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Thailand, the United Kingdom and the United States.

Its core assets comprise an integrated network of points-of-presence (PoPs), datacentres and sub-marine cables across Asia-Pacific, operated out of delivery centres throughout the Asia-Pacific region. Pacnet operates 109 PoPs across 61 cities in the Asia-Pacific region and 8 cities outside of the region (US and Europe) aimed at both carrier and enterprise customers.

Pacnet operates a network of 29 interconnected data centres in 17 cities across the Asia-Pacific region, of which 7 have Tier III accreditation. Pacnet also has Asia’s largest privately-owned submarine cable network, which lands at 21 cable landing stations in China, Hong Kong, Japan, the Philippines, Singapore, South Korea and Taiwan. In addition, the company controls two of the five fibre pairs on the Unity trans-Pacific submarine cable network connecting Japan to the United States.

The company has a broad customer base. It focuses on two key customer segments: enterprise and carrier customers. In the enterprise segment, Pacnet has about 2,400 customers with strong penetration of financial services, internet, social networking players, e-commerce, technology and professional services. In the carrier segment, It has about 220 customers comprising both retail and wholesale telecommunications players. Pacnet has also developed a strong franchise with the over-the-top segment, in line with Telstra’s strategy.

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