Telstra And Pccw To Form Convergence Alliance
MEDIACOM-RELEASE-TELSTRA-&-PCCW
TELSTRA AND PCCW TO FORM LEADING ASIA PACIFIC COMMUNICATIONS AND CONVERGENCE ALLIANCE
HONG KONG, April 12, 2000/ HK PRNewswire-AsiaNet/ -- Pacific Century CyberWorks Limited ("PCCW" - SEHK: 1186HK), the
Hong Kong listed flagship of Pacific Century Group, and Telstra Corporation Limited [ASX: TLS.AU] of Australia have
signed a memorandum of understanding to form a strategic alliance, creating Asia's leading Internet, data, IP backbone;
wireless; business services; and broadband content groups.
There are six key elements to the alliance: (i) a direct investment in PCCW by Telstra of US$1.5 billion in the form of
a convertible note; (ii) the creation of a global data IP backbone company through business and asset contributions by
both partners; (iii) the creation of a pan-Asian mobile phone company which will involve a cash payment by Telstra to
PCCW related to the size of each partner's asset contributions to the joint venture, currently estimated to be US$ 1.5
billion; (iv) a commitment to co-venture actively in value-added business services; (v) to pursue opportunities to
produce an Australian- based interactive HTML content service; and (vi) agreement to facilitate use of PCCW's
Network of the World (NOW)'s content, applications and broadband channel in Australia.
The alliance partners intend to undertake separate IPOs of the IP Backbone Company and Regional Mobile Company.
The alliance brings together the substantial expertise and resources of Telstra, one of the largest communications
companies in Asia, and of PCCW, one of the region's leading broadband and Internet companies. In addition, upon
completion of the proposed PCCW and Cable & Wireless HKT merger, which is currently undergoing approval, the alliance will include the vast strategic and
telecommunications resources of HKT.
The Directors of PCCW accept full responsibility for the accuracy of the information contained in this announcement,
save that the only responsibility of the Board of PCCW in respect of information contained in this announcement relating
to Telstra and the C HKT Group which has been compiled and reproduced from public sources, is to ensure that such information is correctly
and fairly reproduced and presented. Subject as aforesaid, they confirm having made all reasonable enquiries, that to
the best of their knowledge, their opinions expressed in this announcement have been arrived at after due and careful
consideration and there are no other facts not contained in this announcement, the omission of which would make any
statement in this announcement misleading.
PCCW and Telstra are ideal partners with complementary assets and businesses, compatible visions and a synergistic
strategic fit. Together they will be able to take advantage of rapid changes, increasing demand and consolidation in the
communications markets, by creating the first pan-Asian companies with true regional capabilities in the high growth
areas of IP backbone transport and wireless telephony. In addition, the parties intend to leverage their significant
assets and skills in the areas of business services and converged content.
The strategic alliance is subject to a number of preconditions including the successful completion of the acquisition by
PCCW of Cable HKT (HKT [SEHK: 8.HK].
Mr. Ziggy Switkowski, Chief Executive Officer of Telstra said, "Our relationship with PCCW reflects the dynamic and
industry-reshaping impact of the online and wireless environments. It is a defining moment for Telstra's position in
Asia and sets in place our strategy with one of the best partners in Asia. We share similar strategies, values and
aspirations. This partnership will afford our shareholders a valuable position in these emerging markets and high growth
communication businesses."
"Strategically, PCCW has always identified world-recognized partners like Telstra, who share the company's vision of
connectivity and broadband content for the Asia Pacific region," said Richard Li, Chairman of Pacific Century Group.
"Our alliance with Telstra is another step towards achieving our vision of creating the world's largest broadband
Internet business."
Creation of Two Joint Venture Companies
Two new separate joint venture companies will be created by the alliance partners. Telstra and PCCW will each contribute
relevant operating assets and businesses into the new companies.
IP Backbone Company
The IP Backbone company will operate as a global carrier of data, voice and Internet services in the Asia Pacific
region, and will expand aggressively regionally and ultimately globally. It is expected that PCCW and Telstra will be
equal partners in this company. IP Backbone Company would own relevant submarine cable, gateways, landing points,
licences, satellite assets, points of presence, subsidiary companies and other relevant backbone infrastructure assets
currently owned by PCCW, HKT and Telstra.
The joint venture brings together two of the largest carriers of voice, data and Internet traffic and highly
complementary points of presence across Asia.
According to Telegeography 1999 statistics, Australia and HK together account for 16 percent of all intra-Asian traffic
and 20 percent of Asia-North America traffic. In addition, Australia and HK have 1.2 Gbps of Internet connectivity and
total annual international voice traffic of 5 billion minutes.
The aim is for the IP Backbone Company to become the leading provider of carriage in the rapidly growing broadband
environment as well as being the carriers' carrier in the region. The company will be headquartered in Hong Kong.
Regional Mobile Company
A Regional Mobile Company will be created to combine and grow key wireless properties across Asia and aggressively drive
the development of wireless data utilizing WAP and 3G technologies. Initially, PCCW and Telstra will own 60% and 40% of
Regional Mobile Company respectively with Telstra having the right to equalize its economic interest in the future. The
company will own the mobile business in Hong Kong and all the mobile businesses of the partners outside of Australia. In
addition to contributing its international wireless assets (owned or to be acquired), Telstra will make a cash payment
to PCCW related to the size of each partner's asset contribution to the joint venture (currently estimated to be US$1.5
billion). The partners intend to aggressively expand this business across Asia adopting business models appropriate for
each country, which could include acquisitions, virtual network operations and further strategic partnering. Both
partners will have equal board representation and management rights. The company will be headquartered in Hong Kong.
Business Services
Telstra and PCCW believe there is a substantial opportunity to create the leading business across Asia in many areas
such as network facilities management, data hosting, enterprise solutions, application service providers ("ASP")
initiatives and business-to-business e-commerce. The partners have agreed to actively work together to create ventures
to take advantage of this opportunity.
Broadband Content Production
PCCW and Telstra have also agreed to pursue opportunities to produce an interactive content service. Specifically,
Telstra and PCCW would seek to build an Australian-based venture to aggregate Australian HTML content for global
distribution.
Broadband Cooperation
The partners will work together to facilitate use of PCCW's NOW content and applications in Telstra's narrowband and
broadband internet offerings and distribute NOW's broadband channel in Australia. NOW is PCCW's global brand for its
Internet service offerings.
Company Information
Pacific Century CyberWorks Limited
Pacific Century CyberWorks Limited (Reuters: 1186.HK; Bloomberg: 1186) is the Hong Kong-listed technology flagship of
Pacific Century Group (www.pcg-group.com) since August 1999. In less than a year, PCCW (market capitalization more than
US$25 billion on a fully diluted basis) has grown to become Asia's biggest Internet group outside Japan (the third
largest in Asia) and aims to be the world's largest broadband Internet provider. Through investments in more than 40
content, technology and e- commerce providers, PCCW aims to create a one-stop shop for companies to extend their
businesses onto the web and to foster rapid growth across the larger internet economy in Asia. Together with the
Government of HKSAR, PCCW is building the Cyberport - an important information infrastructure project to promote the
development of IT in Hong Kong.
Telstra Corporation Limited
Telstra is Australia's most significant communications carrier and is a world-class fully integrated service provider
across wireline, ADSL, HFC, satellite and digital wireless networks and platforms. It is Australia's leading ISP, has
the most highly accessed family of internet portals and sites and provides entertainment and multimedia content over its
broadband network and through its Pay-TV joint venture, Foxtel. Telstra has indicated its interest to expand its
activities in Australia and regionally in the digital media area. Telstra also has focused its B2B and B2C activities in
major industry growth areas eg. entertainment, health, financial services, insurance, education and travel and has a
significant stake in Australia's largest e-commerce enterprise.
Cable & Wireless HKT Limited
C HKT, a principal subsidiary of C, is a world-leading integrated communications company, and Hong Kong's major full- service communications provider,
marketing a full array of quality voice and data telecommunications services backed by a state-of-the-art, fully digital
fibre-optic network. C HKT's services include basic telephony; Interactive TV (iTV); international calls; narrow and broadband Internet
access; mobile telephony; multimedia services; satellite links; specialized fax and data products; telecommunications
equipment and services; teleservices, including customised solutions; and value-added services. With over 3.6 million
lines in operation, the Company has more than one line for every two people in Hong Kong. PCCW proposed a merger with
Cable & Wireless HKT Limited, subject to a number of pre-conditions.
ENDS