* Citic Telecom to use internal resources for acquisitions
* Citic Telecom first acquired 20 pct stake in CTM in 2010
* CTM profit before tax $133 million in year to March 2012
By Denny Thomas and Kate Holton
HONG KONG/LONDON, Jan 14 Shares of Citic Telecom
International Holdings Ltd had their biggest one-day percentage
gain in more than two years on Monday after striking a $1.2
billion deal to gain control of a Macau telecommunications
company from Cable & Wireless Communications Plc and
Portugal Telecom SGPS SA.
The deal will help Citic Telecom, backed by China's
state-owned conglomerate Citic Group, gain greater access to
fast-growing Macau and more retail customers. That prompted a
near 18 percent rally in Citic Telecom shares on Monday, the
biggest one-day gain since September 2010.
On Sunday, Citic Telecom agreed to buy a further 79 percent
stake in Macau's dominant telecommunications operator Companhia
de Telecomunicações de Macau SARL (CTM). Macau, the world's
largest casino market, has been performing strongly for CWC
mainly due to tourism, but the London-listed company is exiting
some non-core markets to focus on the Caribbean and Central
Citic Telecom had already acquired 20 percent of
CTM in 2010 and the latest deal will give it 99 percent.
Government-owned Macau Post will continue to own a 1 percent
stake, the two Chinese companies said on Sunday.
Citic Telecom and Citic Pacific are part of China's
state-owned Citic Group, with businesses spanning financials to
mining. Citic Telecom is focused on China and Hong Kong, but is
expanding into international markets, it said in the statement.
Citic Telecom has also been diversifying its customer and
services profile from wholesale to become more consumer-focused,
the statement said.
CWC sold its 51 percent stake in CTM for $749.7 million, it
said in a separate statement. The sale comes after the British
group, which traces its history back to the 1860s, sold assets
in Monaco and in island nations like the Maldives to Bahrain
Telecommunications Co in December in a deal worth up
to $1 billion.
"Our sense is that CWC management is now more in control of
its destiny having rid itself of onerous commitments left over
from the CW Group demerger," Deutsche Bank said in a report.
"With asset sales now agreed, investor focus will shift to
the ability to grow existing assets and augment growth with new
investment," it said, adding that the deal represents a sound
valuation based on its discounted cash flow model.
Portugal Telecom said it would sell its 28 percent stake in
CTM for $412 million and also signed a technology partnership
"This sale reinforces even more our financial flexibility,"
Zeinal Bava, CEO of Portugal Telecom, said. The CEO said the
sale would allow the group to focus investments in strategic
areas: Portugal, Brazil and Africa.
The deal values Macau's CTM at $1.47 billion including debt
and represents an enterprise value to core earnings multiple of
8.9 times based on results for the 12 months to 31 March 2012,
CWC said. CTM had a net cash balance of $70 million as at 31
CTM is engaged in mobile, fixed-line and broadband services
in Macau and is a major supplier of telecommunication services
to corporate customers in Macau.
By 0229 GMT, Citic Telecom shares were up 15.2 percent at
HK$2.58, retreating from a 52-week high of HK$2.64. The
benchmark Hang Seng share index was up 0.3 percent.
Located on China's southern coast, Macau, a special
administrative region like neighbouring Hong Kong, raked in $38
billion in annual gambling revenues in 2012 after monthly
revenues for December hit a record.
Citic Telecom plans to fund the acquisition with internal
resources and has secured some funding commitments from a group
of banks and other financial institutions, it said. It may also
consider raising fresh equity or bonds at a later stage to
refinance the current facilities, it added.
CTM reported revenue of $524 million and profit before tax
of $133 million in the 12 months to March 2012. It had $323
million of gross assets, and 460,000 mobile customers, 173,000
fixed-line customers and 142,000 broadband customers, as of 30
Barclays Bank is acting as the lead financial adviser and
Citic Securities Corporate Finance (HK) Ltd is acting as the
financial adviser to Citic Telecom. CITIC Securities Corporate
Finance is also advising Citic Pacific. J.P. Morgan Cazenove