* Telstra to sell stake in CSL to HKT in deal worth $2.4 bln
* HKT will also buy remaining 23.6 pct stake from New World
* Telstra says committed to Asia expansion strategy
By Jane Wardell and Michael Flaherty
SYDNEY/HONG KONG, Dec 20 Australia's Telstra
Corp. has agreed to sell its Hong Kong mobile phone business to
a company controlled by billionaire Richard Li in a deal worth
$2.4 billion that boosts the scion's share of the city's
saturated mobile phone market.
Australia's biggest phone company said in a filing that it
had agreed to sell its 76.4 percent stake in its CSL New World
to HKT, a listed arm of Li's PCCW Ltd media
conglomerate, for A$2 billion ($1.8 billion).
HKT will also buy the remaining stake in CSL held by Hong
Kong-based New World Development Ltd., the property developer
controlled by the family of billionaire Cheng Yu-tung, according
to the filing.
The deal gives Telstra a cash war chest to pursue other
assets as part of its Asia strategy, and strengthens Li's grip
of the city's mobile phone market with the return of an asset he
sold more than a decade ago. It also cuts the number of mobile
carriers in the territory from five to four, easing competitive
The deal will give Li, the younger son of Asia's richest
man, Li Ka-shing, about a third of the territory's mobile
market, according to HKT.
Hong Kong has one of the highest mobile service subscription
penetration rates in the world at 16.7 million subscribers, or
about 2.3 per person, Hong Kong government figures show.
Smartphone penetration in the Asia-Pacific region is
booming, according to Nielsen, with growth in a number of
markets approaching saturation. The region has eclipsed
penetration levels in the United States and many European
nations, Nielsen said in a September report.
HKT is already Hong Kong's top telecoms company, which
together with PCCW provides the city with its quadruple-play
platform: fixed line, broadband internet, television and mobile.
The deal to buy back CSL takes HKT from the smallest to the
largest player in the Hong Kong mobile market by customers,
according to Reuters Breakingviews.
PCCW shares jumped 6.62 percent to HK$3.38 in late trade,
against a 0.3 dip on the main index. Telstra's shares closed 1.8
percent higher at A$5.20 in Sydney, while the main index was up
Other Hong Kong mobile operators also posted gains as
investors bet that industry consolidation would ease pressure on
prices in the battle for subscribers. SmarTone was up
19.4 percent and Hutchison Telecommunications rose 11.4 percent.
The CSL deal is subject to regulatory approval and HKT said
it saw no significant competition concerns. The company said
that as part of its application to the Communications Authority
it had offered pro-competition measures.
Telstra's ownership of CSL came from striking two deals with
PCCW for a total of $2.3 billion, the last one inked in 2002.
The Melbourne-based company bought 60 percent of CSL from
PCCW for $1.7 billion in 2001, and the remaining 40 percent for
$614 million the following year, according to PCCW filings.
But the purchase has not been smooth sailing for the
Australian firm. In July 2010, Telstra said it would take an
impairment charge of about A$170 million to the carrying value
of its CSL subsidiary.
Telstra Chief Executive David Thodey said it was
the right time to sell CSL, which has recorded compound annual
revenue growth of 9.4 percent over the past three years. The
sale was expected to generate a profit of around A$600 million,
the company said.
"There are a number of dynamics in the Hong Kong mobiles
market that means this is the right opportunity for Telstra to
maximise our return on this successful asset," Thodey said in a
Thodey said Asia remained an important part of Telstra's
strategy and the company intended to be in the region for the
"It is interesting considering they're looking at an
Asian-expansion story, to be selling out of their Hong Kong
division, but the price and what they're getting for it does
seem appealing," Evan Lucas, a market analyst at IG, said.
Lucas said it did raise questions about releasing an asset
that was a good foothold into China, but on balance it is "a
very nice pick-up and good for shareholders".
Telstra owns a controlling stake in Autohome Inc,
the owner of Chinese car sales websites, that listed on the New
York Stock Exchange earlier this month with a market value of
around $3.2 billion.