Disclosure details cold comfort for IP bankers
Insufficient disclosure of details on the Internet protocol (IP) backbone joint venture between Pacific Century CyberWorks and Telstra Corp could affect local banks' participation in a US$2 billion loan being syndicated, according to bankers.
In a conference call with joint- venture officials on Monday, bankers were puzzled by the company's unwillingness to disclose financial details.
'They were using commercial secrets as an excuse to avoid questions such as investments in its 50 cable systems and details about its landing rights, which makes it difficult for us to argue it's a strong business case,' said one Asian banker.
Other bankers were also not convinced. 'Regional data growth is expected to grow faster in other parts of Asia than in Hong Kong and Australia but they do not have a good reason for it. The fact that they were an early bird in setting up regional offices does not guarantee success,' said another banker.
In documents presented to bankers, the joint-venture revenue is expected to grow to US$1.94 billion next year and by 2007 will rise to US$4.5 billion.
Free cash flow, or earnings before interest, tax, depreciation and amortisation, is projected to grow 1.4 per cent to US$505 million and would increase to US$1.44 billion in 2007.
Despite the strong projections, bankers have reservations as to how many resources will be channelled into the IP business.
Of the US$2 billion raised by the backbone company, only a quarter will be reserved for working capital. CyberWorks will receive US$1.125 billion while US$375 million goes to Telstra.