Citic Telecom in quest for more strategic acquisitions
Global operations expand after the takeover of Acclivis in Southeast Asia and Linx in Europe
Citic Telecom International Holdings, a subsidiary of China’s largest conglomerate, plans to pursue more strategic acquisitions and alliances after reporting a moderate rise in profit last year.
“We will not stop looking for opportunities to acquire foreign companies and form partnerships,” Citic Telecom chairman Xin Yuejiang said at a press conference on Monday.
Xin said the company’s recent acquisitions have helped it transform into a global corporate services provider, which is poised to accelerate its cloud and data centre operations.
That expansion will be mainly anchored around the company’s two recent acquisitions, Singaporean cloud computing services provider Acclivis Technologies and Solutions, and the European network infrastructure business of Netherlands-based Linx Telecommunications.
Cloud computing enables companies to buy, sell, lease or distribute online a range of software and other digital resources as an on-demand service, just like electricity from a power grid. These resources are managed inside data centres. “Cloud” refers to the internet as depicted in computer network diagrams.
“The landscape of our corporate business has changed dramatically after we acquired Linx and Acclivis,” Citic Telecom chief executive Lin Zhenhui said.
The broad European coverage from the Linx deal, for example, encompassed 14 countries, according to chairman Xin.
Citic Telecom reported a 6 per cent increase in net profit to HK$850.1 million (US$109 million), up from HK$802.2 million in 2015, on the back of strong growth in internet services and enterprise solutions revenue, and a reduction in finance costs.
Revenue, however, declined 7.8 per cent to HK$7.7 billion from HK$8.3 billion a year earlier, which was attributed to a decline in sales of mobile phones and roaming services, as well as adjustments in prices.
Citic Telecom’s share price rose 3.2 per cent to finish at HK$2.57 on Monday, its highest close since reaching HK$2.59 last month.
The company’s five major business categories are mobile sales and services, enterprise solutions and internet, international telecommunications and fixed-line services. It also owns Companhia de Telecomunicacoes de Macau, the gambling enclave’s main telecommunications network operator.
Lin pointed out that the central government’s efforts to tighten capital controls would not have a big impact on Citic Telecom’s business expansion plans because the company is based in Hong Kong.
In November, the company purchased the entire equity interest that information technology services company DeClout had in Acclivis for S$75 million (US$53.5 million).
Citic Telecom said that as of December 31 it had outstanding capital commitments of HK$258.4 million for the Linx deal, including the acquisition cost, purchase of telecommunications equipment and network construction expenses.
Worldwide cloud services and infrastructure spending is forecast to reach US$203.4 billion by 2020, up from an estimated US$122.5 billion this year, according to research firm IDC.