Australian incumbent Telstra has written off AUD 965 ($578m) from the value of its 50% shareholding, leaving it with a value of zero in its books, while Hong Kong-based Pacific Century Cyberworks Ltd (PCCW) says it will write off HKD 8.26bn ($1bn) from its half share.
Earlier this month, PCCW was stalking Cable & Wireless Plc, which had been brought to its knees by the same problems that it has now emerged PCCW was experiencing in its own backyard with its Reach investment. PCCW’s credibility was badly dented by the less than professional way it approached C&W, and the latest write-downs could provoke rating agencies to downgrade the company’s debt.
Telstra chief executive Ziggy Switkowski said that conditions in the global market for internet capacity had not improved in recent months, and contracts coming up for renewal had seen pricing continue to move downwards. He said good performances from Reach’s international voice connectivity business was not sufficient to compensate for sharp declines in data margins.
Significant changes to Reach’s business model will be required as it confronts competitors using unorthodox pricing strategies or operating from a restructured cost base after emerging from bankruptcy, said Switkowski.
Reach was formed in 1990 and merged the two companies’ international operations so that it embraced interests in 50 submarine cable ventures, four satellite earth stations serving more than 20 satellites, and had 22 points of presence in 14 countries. The company is currently involved in talks with a syndicate of banks to refinance debt of more than $1.5bn.
Reach’s CEO Alistair Grieve has quit and will be replaced by Telstra’s president Dick Simpson.
Source: Computerwire
