JAKARTA: Telkom’s decision to acquire Pacnet’s undersea cable assets is considered as a negative measure.
This is based on an analysis of Vice President & Senior Analyst Corporate Finance Group Moody's Investors Service Hong Kong Ltd and Nidhi Dhruv, Analyst & Corporate Finance Group Moody's Investors Service Singapore Pte Ltd.
“The decision to acquire Pacnet’s undersea cable assets would be considerably more expensive than
purely leasing capacity,” said Moody’s Investors Service.
“It will also involve upfront acquisition costs and additional capex to link into Pacnet’s cable network to support of Telkom’s convergence of fixed phone, broadband, pay TV and mobile services.”
Previously, as Moody's citing Reuters, Telkom submitted a bid to buy Pacnet Ltd. in a deal worth US$1 billion including debt.
However, Telkom has since denied having made a formal bid, it did confirm that it was assessing the transaction, the analysis said.
In the other hand, the deal, if consummated, would be credit positive for Pacnet, Asia’s leading independent undersea cable operator, as the company’s profitability has been under pressure reflecting serious declines in bandwidth pricing during a period of significant untapped capacity.
According to the analysis, Pacnet owns 46,420 kilometres of submarine cable infrastructure throughout Asia and the Pacific Ocean.
Over the past year, Pacnet considered an initial public offering as well as a sale of the company to provide much needed capital to support its operations and fund growth in higher margin businesses.(T03/aph)