HKBN sells off network assets for $644m

Tony Brown/Informa Telecoms and Media
There are some deals that you really should see coming a long way off but somehow you miss them and then when the headline lands in your inbox like a right-hook from Mike Tyson back in the 1980′s you feel a little foolish.
 
City Telecom Announcement: Very Substantial Disposal” the subject line read and pretty soon I was reading that Hong Kong broadband operator City Telecom – owner of the powerful Hong Kong Broadband Network (HKBN) service – was selling its network assets to Metropolitan Light Co., owned by an Asian division of CVC Capital Partners for $644 million.
 
Since the HKBN FTTH network – currently covering just shy of 2 million homes – was deployed for one of the lowest prices amongst all developed markets at around $200 per home passed and cost only around a reported $400 million to deploy the deal will give CTI quite a decent profit – and me a reminder to have a little more foresight in future.
 
After all, the deal was there to be done all along, HKBN has all but completed its network and is making money on providing low-price network access to the corporate and residential markets – a scenario beloved of private equity firms – but now has itchy feet as it pursues a future as a content and applications player.
 
The way ahead
 
With its network access business now sold off to CVC HKBN will now focus on expanding on what it calls its multimedia business – with the firm particularly excited about its looming entry into the terrestrial broadcasting business if its spectrum license application to the Broadcasting Authority is successful.
 
The cash pile it has accrued via its FTTH network sell off – with the deal allowing HKBN to continue to have access to the network for the next 20 years – will enable the company to cover its biggest weakness in the TV market: a chronic lack of exclusive, popular content.
 
HKBN has watched on the sidelines whilst major market rivals PCCW and i-Cable have fought an occasionally bitter and expensive content war – especially over EPL soccer rights – and has instead pursued a far more modest and cost effective content acquisition strategy for its IPTV platform.
 
However, in recent months, with its entry to the terrestrial TV market looking ever more likely, the firm has begun investing much more heavily in content production facilities as well as production professionals. The company seeks to transform from a dumb pipe broadband provider to being a major content player both in Hong Kong and in the broader APAC region.
 

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