Telstra $1B better off in new PCCW deal

By Phil Boeyen, ShareChat Business News Editor

Friday 13th October 2000

Telstra says the revised terms of its deal with Pacific Century Cyberworks have a positive financial spin-off for the company.

The Australian telco says the new deal reduces its cash commitment by about A$1 billion and increases assets, security and control compared to the previous agreement.

Under the revised terms Telstra will acquire 60% of HKT Mobile for a purchase price of US$1.68 billion. Previously the agreement was for Telstra to buy a 40% stake in the mobiles business of PCCW for US$1.5 billion.

The joint venture to create an internet protocol backbone business - IP Backbone Company - will still be a 50:50 partnership, and IPBC will purchase PCCW's and Telstra's existing global wholesale businesses for a combination of cash and equity.

PCCW will get an initial cash payment of US$750 million and any further cash consideration will be paid in equal amounts to the two companies, with the parties expecting at least US$2 billion of debt being raised by IPBC to pay them out.

PCCW will also issue Telstra with a convertible note for US$750 million with a term of six years and an interest coupon of 5% for the first four years, and 7% for the remaining two years.

Telstra says the deal should be completed early next year, subject to the necessary Hong Kong and Australian regulatory approvals and licences and the approval of PCCW shareholders.

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