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In its biggest acquisition, Hongkong Telecom has agreed to buy rival mobile phone operator Pacific Link Communications for $4.83 billion.

 The move will reassert Telecom's dominance over the cellular market and could well speed up further consolidation in Hong Kong's fiercely competitive mobile industry.

 Pacific Link is 65 per cent owned by First Pacific Co and 35 per cent by British cellular company, Vodafone.

 The market cheered the deal with Telecom's shares gaining 20 cents to $15.70 and First Pacific's shares rising initially on the news but falling back to end unchanged at $5.50.

 'It is good for both parties - First Pacific gets out of the business with cash to fund other cellular operations and Hongkong Telecom gets extra capacity and the potential for huge cost savings across the networks,' HSBC analyst David Gibbons said.

 Telecom CSL mobile division and First Pacific said a memorandum of understanding had been signed yesterday under which Telecom would pay in cash and receive 100 per cent of Pacific Link, debt free.

 'It is the ideal marriage, Pacific Link is the ideal partner,' Telecom chief executive Linus Cheung Wing-lam said.

 First Pacific said that after the retirement of Pacific Link's debt it would receive about $2.4 billion as well as a further $360 million from the repayment of a loan facility extended to Pacific Link.

 'First Pacific has taken the view that it will focus on its telecommunications efforts on markets where it can be the dominant player or a solid second operator,' managing director Manuel Pangilinan said.

 'It would be clearly difficult to achieve that status in Hong Kong.'  Pacific Link has a fledgling personal communication service (PCS) network and an established D-amps network.

 The D-amps network, with 270,000 subscribers, has fallen well behind its main competitors, including Telecom, SmarTone and Hutchison Telecom.

 The deal will re-establish Telecom as the biggest player in Hong Kong's cellular phone market with more than 800,000 customers out of a market of about 1.8 million.

 The company can easily afford the $4.8 billion price tag given its reserves of about $15 billion.

 Telecom CSL managing director Allen Ma Kam-sing said: 'We had been waiting for the opportunity to strike [for a PCS network]. With this deal came that opportunity.'  Telecom talked to several PCS operators for months after it failed to win one of the licences handed out last year.

 Financial director David Prince said the deal would help Telecom's earnings but said the benefits would not be felt in the current financial year.

 Telecom is thought to be looking for $3 billion in what it calls cost synergies by merging Pacific Link and CSL's operations.

 The combined operation will have 1,300 radio base stations and 95 branded outlets.

 Mr Cheung said that it was inevitable that some of Pacific Link's 1,100 staff would have to go, but he hoped to keep most of the company's staff and talent.

 First Pacific said that despite leaving the Hong Kong mobile market, telecoms would remain a core business activity, with investments in regional markets.



Telecom clinches $4.8b swoop on Pacific Link