Australian telco Telstra has been making a play for HKT's international unit PCCW Global.

It held talks for several months directly with HKT, and also in conjunction with Miami-based private equity firm I Squared Capital, Sydney Morning Herald reported.

I Squared, which already owns some major global telecoms assets, was willing to take a partial stake in a merger between Telstra International and PCCW Global. It hired Martjin Blanken, a former head of Telstra Enterprise, to lead negotiations on its behalf. The talks continued to an advanced stage until February, but the current status is unclear, the SMH said.

Kerb appeal

For Telstra HKT's global assets have obvious appeal as it tries to fire up offshore growth. PCCW Global operates a Tier-1 global Internet backbone with 127 PoPs, a huge MPLS VPN footprint and a new highly agile SDN-based service portfolio.

Telstra is in the process of a major restructure in which its assets and businesses are being placed in dedicated subsidiaries. It announced last month that the international business, including subsea cables will also be placed in a separate subsidiary.

This is not its first deal with HKT. At the height of the bandwidth bubble the two merged their subsea assets to form the Reach JV. Telstra also acquired HKT's mobile arm CSL but sold it back in 2013. Telstra International has 3,500 employees and subsea capacity across the Pacific, Asia and Europe, with access to 2,000 PoPs.

The role of I Squared, an infrastructure specialist with some $13 billion of assets under management, is intriguing. It purchased HGC Global Communications, Hutchison Telecom's global fiber unit, for HK$14.5 billion ($1.9 billion) in 2017. HGC operates multiple fiber routes into mainland China as well as worldwide fiber capacity.

Last October I Squared bought the infrastructure assets of NYSE-listed GTT Communications for $2.15 billion. "This is part of our digital strategy where we are effectively taking fiber network assets in Asia, Europe and the US, with the intention of growing them," managing partner Gautam Bhandari told Reuters.

Taking a stake in a Telstra-PCCW Global deal, as is reported, would seem a departure from its practice of fully acquiring assets. But it also underlines the company's confidence in the potential of the global capacity markets in the current data boom and ahead of the wave of 5G services.

I Squared Capital did not respond to a query from Light Reading.

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— Anne Morris, contributing editor, special to Light Reading