HKBN Snaps Up Rival New World Telephone for $84M

Hong Kong fiber specialist HKBN has acquired rival New World Telephone, doubling its enterprise portfolio.

Privately held HKBN, Hong Kong's biggest fiber player and second-biggest broadband provider, said it would buy the assets of New World Telephone Holdings Ltd (NWT) for HK$650 million ($83.6 million).

The combination will result in a business with more than HK$3 billion ($386 million) in total revenues and more than HK$1 billion ($129 million) in enterprise revenues, Hong Kong Broadband Network Ltd. (HKBN) said.

"This acquisition will double our scale in the enterprise solutions market, which represents approximately one third of the total revenues for the enlarged group," said CEO William Yeung.

The acquisition will strengthen HKBN's presence in the enterprise market and give it greater competitive scale, he said. Rival PCCW Solutions recorded sales of HK$3.37 billion ($433 million) and EBITDA of HK$622 million ($80 million) from its corporate and IT services business in 2014.

NWT generated revenues of HK$613 million ($79 million) for the year ended June 30 2015, virtually all of its from business services. Its network covers 491 commercial buildings across Hong Kong.

Its main services include IDD voice, data center offerings and other fixed-line and broadband products. Its online marketing business generated HK$137 million ($18 million), mostly from search advertising, online display advertising and social media.

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It posted a post-tax profit of HK$26m ($3.3 million) on revenues of HK$750 million ($96 million) in 2014-15, and the year before recorded a HK$239 million ($31 million) loss on sales of HK$777 million ($100 million).

A subsidiary of New World Development, one of Hong Kong's biggest property conglomerates, NWT was established during the first wave of deregulation in the city in 1995.

It has 39,000 small businesses that spend approximately HK$1,010 ($130) per month on average and around 5,000 enterprise customers, who spend on average more than HK$5,000 ($643), HKBN said.

HKBN said it expected to achieve capex savings by absorbing NWT's fiber network and through greater scale in purchasing. It also expects to be able to lower staff costs.

The acquisition is financed by a five-year loan of up to HK$700 million ($90 million) underwritten by JPMorgan Chase Bank.

HKBN has invested approximately HK$4.1 billion ($527 million) in its fiber network across Hong Kong over the past 14 years.

— Robert Clark, contributing editor, special to Light Reading