China Merchants Capital plans to acquire a 40% stake in the copper and fibre connection access service arm under the telecommunications group controlled by Hong Kong billionaire Richard Li for $870 million, an exchange filing showed on Wednesday.
The target company – Regional Link Telecom Services Holdings Limited – will remain an indirect subsidiary of PCCW and HKT upon completion of the transaction, per the filing.
Alongside the investment, Passive Netco (Fiber Link Global Limited), a wholly-owned subsidiary under Regional Link Telecom Services, will sign a master services agreement to provide network access and other related services to HKTL, an indirect wholly-owned subsidiary of HKT.
The service agreement will be effective for an initial term of 15 years which will be automatically extended for successive periods of five years. The agreement offers Passive Netco a monthly service fee per unit of network access services users as well as a minimum annual service fee of HKD 1,750 million ($224.1 million), per the filing.
The investment helps HKT, the major operator in fixed-line, broadband and mobile communications services in the city, to unlock value in its passive network business, as well as sharing the share capital expenditure required for future business expansion, as the firm taps into the rise of digital transformation of enterprises.
China Merchants Capital is a joint venture between state-affiliated China Merchants Group and Asian warehouse giant GLP.
China Merchants Group was considering bidding for a stake in the copper and fiber connection access service unit of PCCW after separate talks between the conglomerate and Abu Dhabi’s sovereign wealth fund fell apart, Bloomberg first reported in March.
A follow-up report in May said China Merchants Group was considering buying a 40% stake for $850 million to $900 million, citing people familiar with the matters.
The deal adds another gain for the infrastructure portfolio under China Merchants Capital, which previously joined an international investor consortium led by affiliates of BlackRock and Hassana to acquire a 49% stake in Aramco Gas Pipelines Company, a subsidiary of Aramco, in a lease and leaseback deal for $15.5 billion, in February 2022.
