• Fri
  • Apr 25, 2014
  • Updated: 1:03am

CVC to buy City Telecom assets

PUBLISHED : Thursday, 12 April, 2012, 12:00am
UPDATED : Thursday, 12 April, 2012, 12:00am

City Telecom, with its focus fixed on entering Hong Kong's free-to-air television market, has agreed to sell its telecommunications assets for HK$5.01 billion to a company backed by British buyout firm CVC Capital Partners.

In a filing with the Hong Kong stock exchange, City Telecom said that exiting all its telecommunications-related businesses in Hong Kong and Canada would allow the company to devote 'very significant financial resources' to its multimedia operations. The deal will be completed upon shareholders' approval.

Metropolitan Light, a company owned by the general partner of funds advised by Hong Kong-based CVC Asia-Pacific, will acquire assets including fixed-line communications provider Hong Kong Broadband Network (HKBN), operations in Canada, and customer support and call centre services in Guangzhou.

HKBN is Hong Kong's second-largest broadband operator. It owns and operates a fibre-optic network serving 2 million homes and 1,700 commercial buildings in the city.

City Telecom said it would return part of the proceeds of the sale to shareholders through a special dividend of HK$2.02 billion, representing HK$2.50 per share. The rest of the purchase price will fund the expansion of its 400,000 sq ft 'Multimedia Centre' in Tseung Kwan O. Construction of this facility, which was started in February, will cost up to HK$800 million when it is completed by April 2014.

City Telecom's share price rose 5.43 per cent to HK$5.24 yesterday, valuing the company at HK$4.05 billion. The stock resumed trading after being suspended on April 2 pending the announcement of the disposal.

A combination of equity and debt financing will support Metropolitan Light's acquisition. It has HK$2.65 billion from funds advised by CVC Asia-Pacific and HK$2.5 billion in loan commitments from JP Morgan Chase Bank and Standard Chartered Bank in Hong Kong.

'We look forward to supporting HKBN's management and employees in providing high-speed and high-reliability broadband and telecoms services to its customers,' said CVC Asia-Pacific managing partner Roy Kuan. Tony Brown, a senior analyst at Informa Telecoms & Media, said City Telecom was 'placing its bets on becoming a major force in the free-to-air TV market ... in which TVB's rival has historically largely failed to make much headway'.

City Telecom chairman Ricky Wong Wai-kay has pledged to spend HK$1 billion on programme production for the initial years of the firm's free-to air channel and to film 10 new series this year.

The former Broadcasting Authority (now known as Communications Authority) had earlier recommended that new free-to-air licences be granted to City Telecom, Fantastic Television of i-Cable Communications, and PCCW's HK Television Entertainment. The government's decision on these new licences remains pending.

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