Australia’s Telstra has confirmed it is in advanced talks to acquire undersea cable operator Pacnet and is currently negotiating a price.
Australia’s largest telecom operator said the firms are close to an agreement, with Pacnet reportedly looking to be valued at about $1 billion.
Pacnet owns more than 46,000km of submarine cable infrastructure across Asia and the Pacific Ocean and has nearly 100 points-of-presence (PoPs) globally. A key part of its business is offering managed network, hosting and security services to large enterprises.
It has more than 1,200 employees across 28 offices in 13 countries.
Pacnet, which has been owned by three private-equity firms since 2006, has been struggling financially for the past few years. In May 2012 the company dismissed its long-serving CEO, Bill Barney, who had been with the firm since 2003 when it was called Asia Netcom. (Barney later joined Reliance Globalcom.)
Telstra, after unloading a number of assets over the last year, has a cash pile of more than AUD5 billion ($4.4 billion). It sold its controlling stake (76 per cent) in Hong Kong operator CSL for $2.4 billion in May as well as its struggling Australian directories business Sensis.
Telstra CFO Andre Penn said in October its growth strategy in Asia will look to leverage its core capability in networks as well as offer enterprise services to multinational companies and develop some of its long-term investments, such as e-health or Autohome, a Chinese online car sales business it has invested in.
On the infrastructure side, the acquisition would significantly ramp up Telstra’s subsea network assets in the region. Pacnet owns and operates EAC-C2C, which connects seven east Asian countries/territories, and EAC Pacific, which directly connects the US with Japan.
In addition to looking to make acquisitions with the windfall, Telstra said in August it would buy back shares of up to AUD1 billion (US$930 million) and increase its dividend for a second time this year after its net profit for fiscal 2014 jumped 14 per cent to AUD4.3 billion.