SYDNEY Australia's Telstra Corporation is selling its majority stake in its Hong Kong-based mobiles business CSL to HKT Ltd for A$2 billion ($1.8 billion), even as it says it is committed to the Asian region in the long-term.
Telstra Chief Executive David Thodey said it was the right time to capitalize on the success of CSL, which has recorded compound annual revenue growth of 9.4 percent over the past three years.
"There are a number of dynamics in the Hong Kong mobiles market that means this is the right opportunity for Telstra to maximize our return on this successful asset," Thodey said in a statement.
Thodey said Asia remained an important part of Telstra's strategy and the company intended to be in the region in the long-term.
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.
"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 of the HKT deal.
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".
HKT Ltd will also buy the remaining 23.6 percent of the CSL business that is currently held by New World Development, bringing the total value of the deal to $2.43 billion.
Joanne Chua, investment manager at Rivkin Securities, said the purchase was positive because it increased free cash flow for Telstra.
"This is in line with Telstra strategy because, if you look at the business itself, what they're trying to do at the moment is trying to diversify and trying to build its presence in the Asia-Pacific, so it definitely is a good step for them to step into the Asia market," Chua said.
"Because there are so many dynamics, there are so many different mobile companies in Hong Kong, and Telstra would think this is a really good opportunity to maximize the return on this asset," she said.
Telstra said the sale of CSL is expected to generate a profit of around A$600 million, with net proceeds incremental to the company's free cashflow guidance of A$4.6 billion to A$5.1 billion in 2014.
The deal is subject to regulatory approval in Hong Kong. ($1 = 1.1295 Australian dollars)
(Reporting By Jane Wardell and Thuy Ong; Editing by Paul Tait)