Telstra and PCCW sign reworked agreement

Hong Kong’s Pacific Century Cyberworks Ltd. (PCCW) and Australian telecommunications operator Telstra Corp. have signed a revised partnership agreement the companies announced last Friday.

Under the revised terms of the binding strategic alliance agreement, Telstra will pay US$3.55 billion in cash to PCCW, which allows the high-flying Internet and telecommunications company to lower its debt to less than $5.5 billion, PCCW said in a statement.

Telstra, however, said in a separate statement that the reworked agreement included an A$1 billion (US$529 million) reduction in its cash commitment. The two companies first agreed to form a broad alliance in April, finalizing the plan in August.

For corporations in the Asia-Pacific region, the deal promises to bring into operation several new ventures with broad regional coverage in several key areas, including mobile telephony, IP (Internet protocol) backbone infrastructure and Internet data centres.

As part of the revisions made to the deal, Telstra will pay $1.68 billion for a controlling 60 per cent stake in PCCW’s mobile phone unit, and has the right to appoint the chairman and the CEO of the company. The deal originally called for Telstra to pay $1.5 billion for a 40 per cent stake, and for management to be shared by the two companies.

By combining their mobile phone operations, Telstra and PCCW will be able to create the largest mobile operator in the Asia-Pacific region outside of Japan. Telstra said that the companies would continue a search for an “appropriate” strategic partner for the regional mobile venture.

The deal also calls for the formation of an IP backbone company joint venture, as well as a jointly owned Internet data centre venture. Both companies will be 50-50 joint ventures, and are expected to become leading players in their respective segments in the Asia-Pacific region, the companies said.

PCCW, in Hong Kong, can be reached at Telstra, in Sydney, can be reached at

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