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Telstra Snaps Up Pacnet for $697M

Ray Le Maistre
12/23/2014
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Telstra has struck a US$697 million deal to acquire regional network and data center operator Pacnet, a move that greatly enhances its physical network assets and wholesale/enterprise customer base across South-East Asia, delivers some early carrier SDN experience and gives it the opportunity to offer services in China. (See Telstra to Buy Pacnet.)

The deal does not come as a major surprise, as Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) had already confirmed its interest in Pacnet . (See Telstra Woos Pacnet.)

Pacnet, which has 815 staff in 24 cities, has been on the block for a while, with its investors reportedly seeking $1 billion for the operator. They have banked much less than that but they have, at least, offloaded an asset that was struggling to grow. Telstra should be able to provide the scale that will make better use of Pacnet's assets, which include an extensive, 36,800km submarine network that links the major markets from Japan to Singapore, 29 interconnected data centers in 17 cities and "interests in its China joint venture, PBS, which is licensed to operate a domestic Internet Protocol Virtual Private Network and provide data centre services in most major provinces in China."

Telstra noted in its acquisition announcement that the deal will also give it SDN capabilities, an expanded data center network and "major customers across the region," as well as wholly-owned network assets. All of this "increases the scale and scope of our assets which can be used as a platform for Telstra to scale and expand leading solutions such as unified cloud, unified communications, managed network services and security services," noted Telstra CEO David Thodey. (See Pacnet Turns On SDN in APAC, US.)


For more data center-related coverage and insights, check out this dedicated content channel here on Light Reading.


Pacnet has about 2,400 enterprise customers, including many from the financial services, Internet, social networking, e-commerce, technology and professional services sectors, and about 220 carrier customers. Telstra also noted that Pacnet has "developed a strong franchise with the over-the-top segment," which is "in line with Telstra's strategy."

In 2013, Pacnet generated revenues of $472 million and EBITDA (earnings before interest, tax, depreciation and amortization) of $111 million.

Telstra's investors are neither excited or freaked out by the news: The telco's share price edged down by just 0.7% in Tuesday trading to A$5.96 on the Australian Securities Exchange (ASX).

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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DOShea
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DOShea,
User Rank: Blogger
1/12/2015 | 5:16:54 PM
Re: This changes a lot for Telstra
Interested to see how Telstra organizes its subsea cable assets and its future involvement in new cables. It has at least one of its own cables, and is part of the Asia America Gateway consortium, but this deal brings it many more of its own cable assets. Will it continue to be involved in consortia efforts?
Ray@LR
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[email protected],
User Rank: Blogger
12/23/2014 | 5:05:11 AM
This changes a lot for Telstra
THis looks like a major move for Telstra, making it a serious cloud services player in South-East Asia and giving the likes of Ntt Comms and SingTel more to think about in terms of enterprise market competition.

For me this enhances the value of Pacnet's assets now that there is an operator with scale behind it. 
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