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China Netcom Corporation Ltd recently finished acquisition of telecom carrier Asia Global Crossing (AGC) with the help of a US investment company, said sources close to the deal.
"China Netcom (CNC) made the acquisition with a very competitive price," said the sources under condition of anonymity. But the sources did not reveal details about how much CNC paid and who the US partner is.
According to the sources, AGC owns assets worth US$1.7 billion, and its networks connect to 200 cities in 16 countries and regions.
In an earlier report from the Wall Street Journal, a group of four bidders were readying a US$250 million offer for a controlling stake in AGC, but the paper did not identify their names.
A CNN report also said a newly founded Chinese company named Purple Telecom was among the bidders for AGC.
Neither CNC nor AGC were available for comment.
Industry insiders said that CNC's acquisition expanded the company's telecom capabilities in the Asia-Pacific region and made the company an international telecom carrier.
AGC's networks connect the major commercial cities of Tokyo, Osaka, Hong Kong, Taipei, Seoul and Singapore. It also links Asia to the United States via a trans-Pacific network.
AGC's trans-Pacific network is the most crucial part of the picture, industry insiders noted. Linking Asia and North America, the network provides rich business opportunities with increasing information exchanges between the two continents.
Founded in 2000, AGC was aimed at meeting Asia's increasing telecommunications demand. It provided the Asia-Pacific region with telecom services through a combination of underwater cables, terrestrial networks and city fibre rings.
AGC is 59 percent owned by the US-based Global Crossing, which went bankrupt in January. AGC's other major shareholders include Microsoft and Softbank.
Following the parent company's bankruptcy, AGC was delisted from the New York Stock Exchange in February with the explanation that "it can not meet trading requirements."
The company noted in February that it only had enough cash to last until the second quarter of 2003.
AGC started to look for bidders after the parent company filed for bankruptcy.
CNC has kept a low profile during the last few months. Edward Tian, chief executive officer of CNC, has cut down on public appearances and refused interviews.
His company began to co-operate with AGC in 2001 when CNC bought from AGC four 2.5G (gigabit per second) wavelengths that connected Hong Kong with Los Angeles. In return, CNC helped AGC enter Beijing, Shanghai and Guangzhou via CNC's domestic network.
CNC is a record maker among its domestic peers. In 2001, the company broke the policy barrier to introduce overseas capital into basic telecom operations. Multinationals including News Corp and Goldman Sachs became CNC's strategic investors in a private placement that raised US$325 million.
CNC was set up in 1999 by four organizations: the Chinese Academy of Sciences, the Ministry of Railways, the State Administration of Radio, Film and Television and the Shanghai municipal government. Its vision, to break monopolies in the fixed-line telecom services, became a reality in the split of China Telecom earlier this year.
The former China Telecom was divided into two new companies that occupy northern and southern regions.
CNC was merged into the northern region - China Netcom Communication Group - and became a subsidiary of the group company. Edward Tian keeps the position of chief executive officer at CNC and was named vice-president of the group. He is in charge of international co-operation and capital operations for the group.
The acquisition of AGC, according to the sources, was made by CNC, but not the group.
China's telecom carriers have been very active in the capital market, forming a sharp contrast to their international counterparts.
China Unicom last week announced details of its initial public offering (IPO) on the domestic stock market. The IPO will raise 11.5 billion yuan (US$1.4 billion) to fuel China Unicom's construction of the CDMA (code division multiple access) network.
China Telecom, the dominant fixed-line carrier, was reported to begin a roadshow recently for its IPO in the stock markets in Hong Kong and New York.
In the global economic downturn and the telecom market's nose-dive, China's telecom business have continued rapid growth. The new users for mobile and fixed-line telephones are growing at a monthly rate of 5 million and 2 million respectively.
China's main telecom carriers are becoming the largest in the world. They are gradually showing leadership roles in the international telecom market. Under encouragement of the government, more telecom carriers are showing strong interest in becoming international companies. CNC's acquisition of AGC may be just a start for the international expansion of Chinese companies.
(China Daily September 23, 2002)
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