Light Reading
Wholesale operators GCX and Pacnet are both being eyed up by the same Chinese-backed firm.

Asian Carriers Court Takeover Bids

Robert Clark
News Analysis
Robert Clark
8/1/2014
50%
50%

Two perpetually struggling international bandwidth businesses have reportedly stepped up their efforts to be acquired, and both are being looked at by the same Hong Kong-based wholesale operator.

Global Cloud Xchange , the subsea capacity division of India's Reliance Communications Ltd. (RCom), looks set to be sold to Citic Telecom International Holdings Ltd. (CTI), a unit of the Chinese government investment group Citic Pacific, according to CNBC TV-18.

Citic has also been linked to Pacnet , the progressive wholesale and enterprise service provider that is believed to be seeking US$1 billion for its current private equity owners. (See Asia's Telcos Still Figuring Out Their Cloud Moves and Pacnet Turns On SDN in APAC, US.)

RCom has been trying to offload its capacity division, until recently known as Reliance Globalcom, for years. In 2009, the Indian operator was rumored to be seeking a buyer for its submarine cable properties (formerly FLAG Telecom), and reportedly was close to selling the entire global unit in 2013. It also considered an IPO in 2012, but abandoned that plan. (See Rumor: Subsea, Ethernet Assets for Sale and Reliance Global Unit Sale Imminent.)

The timing of the latest M&A reports is intriguing, given that Reliance only introduced the Global Cloud Xchange (GCX) brand just four months ago, and recently announced a new cable project to provide a direct subsea link between Mumbai and Singapore. (See Reliance Rebrands With Its Head in the Cloud and Global Cloud Xchange Plans New Mumbai-Singapore Link.)

It also appointed Bill Barney, the former CEO of Pacnet, as its CEO in January this year. (See Pacnet Calls Time on Its CEO.)

The deal with Citic has been in the works for months, but was reportedly delayed while GCX completed a $350 million debt issue, which was successfully completed this week. Most of the proceeds will be used to pay off a $250 million loan to GCX's parent, though some of the remaining funds will go towards the construction of the Mumbai-Singapore link.

Pacnet, which was formed in 2008 from the combination of the collapsed Asia Global Crossing and Singapore's Pacific Internet, has found the going hard in the bandwidth and managed services market, where competing with Tier 1 telcos and dealing with continual price erosion make trading tough. It generated revenues of $471.6 million in 2013, down 9% from the previous year, but its gross margin improved to 56% from 50% as it discontinued some lower-margin services.

Like GCX/Reliance Globalcom, it also considered an IPO (in 2011).

The potential involvement of Citic Telecom in both potential deals is no coincidence, as it highlights the determination of Chinese authorities to keep their communications secure in the wake of the Snowden revelations.

Julian Rawle, principal at Julian Rawle Consulting, said the Chinese "don't want to rely on others for their development -- they want to reach the US directly."

However, a further twist could be that any sale by RCom to a Chinese government-backed telco would need approval from Indian security officials. The two Asian giants have an uneasy relationship, and India has put controls on Chinese vendor gear being deployed in Indian networks.

— Robert Clark, contributing editor, special to Light Reading.
Dan O'Shea, Managing Editor, also contributed to this article.

(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
R Clark
50%
50%
R Clark,
User Rank: Blogger
8/2/2014 | 12:34:18 AM
Re: Still just a scale game?
I think IoT is a much bigger play for telecom access rather than longhaul. Right now the big driver on subsea capacity is 4G data and video but the problem is these smaller players just can't get much of the action. The owners of both these cables have been trying to unload the assets for several years and clearly they don't see it getting better regardless of the aggregate demand.
sam masud
50%
50%
sam masud,
User Rank: Light Sabre
8/1/2014 | 11:15:06 AM
Re: Still just a scale game?
As you say, there maybe overcapacity in long-haul. But what I finding interesting is that they are unloading assets at a time when there is a huge buzz about Internet of Things and all kinds of speculation on how much traffic IoT will generate.

 
R Clark
50%
50%
R Clark,
User Rank: Blogger
8/1/2014 | 8:44:22 AM
Re: Still just a scale game?
I think the lesson that was apparent in the bandwidth bubble still applies, which is you've got to have demand at the end of your pipe. Most longhaul subsea cables are backed by tier 1 carriers who all have customers to serve. RCom and Pacnet just have that and that's why they've struggled, especially when prices are falling steadily year by year and every two to three years you're going to have to tip in for an upgrade. Citic Telecom has quitea may not have that but this is a political as much as commercial play for them.
Ray@LR
50%
50%
Ray@LR,
User Rank: Blogger
8/1/2014 | 8:05:52 AM
Still just a scale game?
Is this still a scale game? How many subsea wholesale operators should there be in the world?
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Documentaries
The Rise of Virtual CPE

1|27|15   |   01:38   |   (3) comments


As NFV strategies evolve from tests and trials to production telco networks, expect to hear a lot about virtual CPE (customer premises equipment) rollouts during 2015.
LRTV Documentaries
Optical Is Hot in 2015

1|23|15   |   01:56   |   (2) comments


Optical comms technology underpins the whole communications sector and there are some really hot trends set for 2015.
LRTV Custom TV
Policy Control in the Fast Lane

1|22|15   |   2:57   |   (0) comments


What's making policy control strategic in 2015 and beyond? Amdocs talks with Heavy Reading's Graham Finnie about the key factors driving change in the data services landscape. Find out what his policy management research reveals about the road ahead for policy control – and sign up for
LRTV Documentaries
Highlights From the 2020 Vision Executive Summit

1|21|15   |   4:33   |   (2) comments


In December 2014, Light Reading brought together telecom executives in Reykjavik, Iceland to discuss their vision for high-capacity networks through the end of the decade. The intimate, interactive meeting was set against the backdrop of Iceland's spectacular natural beauty. As one of the event's founding sponsors, Cisco's Doug Webster shared his company's ...
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Harmonic, Helping Carriers Accelerate 4K Video Deployment with Huawei

1|20|15   |   5:42   |   (1) comment


At IBC, Peter Alexander, Senior Vice President & CMO at Harmonic, speaks about the growing interest in pay-TV service and its branching into multiple devices.
LRTV Huawei Video Resource Center
Sony Marketing Director Olivier Bovis Discusses the Outlook for 4K and Cooperation With Huawei at IBC 2014

1|20|15   |   6:50   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Envivio, Helping Carriers Accelerate 4K Video Deployment

1|20|15   |   2:57   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Pay-TV's Networked Future

1|20|15   |   6:29   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about the future of the pay-TV industry and its transition.
LRTV Huawei Video Resource Center
Jeff Heynen: Distributed Access Will Help MSOs Compete in the Future

1|20|15   |   2:26   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about moving to distributed access and the future trend of cable business.
LRTV Interviews
Cisco Talks Transformation

1|20|15   |   13:02   |   (0) comments


In December 2014, Steve Saunders sat down with Cisco VP of Products & Solutions Marketing Doug Webster at Light Reading's 2020 Vision executive summit in Reykjavik, Iceland. They spoke about Cisco's approach to network virtualization as well as how service providers can begin to monetize high-capacity networks through the end of the decade.
LRTV Interviews
Bob Wilson, Arsenal Legend: The Light Reading Interview

1|16|15   |   35:36   |   (3) comments


Arsenal goalkeeping legend Bob Wilson was Light Reading's guest interviewee at the 2020 Vision Executive Summit in December. See what the former soccer star and sports broadcaster had to say when he took to the stage in Iceland.
LRTV Custom TV
What MEF Third Network Initiative Means for SDN & NFV

1|14|15   |   6:13   |   (0) comments


Vitesse Semiconductor CTO Martin Nuss discusses the importance of the MEF Third Network initiative and why it's good news for SDN/NFV industry initiatives.
Upcoming Live Events
February 5, 2015, Washington, DC
February 19, 2015, The Fairmont San Jose, San Jose, CA
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
September 9-10, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
December 1, 2015, The Westin Times Square, New York City
December 2-3, 2015, The Westin Times Square, New York City
Infographics
Hot Topics
Google Continues Gigabit Expansion
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 1/27/2015
BlackBerry Wants Net Neutrality Protection – That's Just Sad
Mitch Wagner, West Coast Bureau Chief, Light Reading, 1/22/2015
Verizon Ready for Google MVNO Challenge
Dan Jones, Mobile Editor, 1/22/2015
FiOS Picks Up Pace Again
Alan Breznick, Cable/Video Practice Leader, 1/22/2015
Indiana Carrier Takes Fiber to the Farm
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 1/22/2015
Like Us on Facebook
Twitter Feed
Webinar Archive