PCCW to raise $1.1bn in HKT sale

PCCW has announced that it plans to dispose of an 11.1% stake in telecommunications company HKT Trust (HKT), raising HK$8.5 billion ($1.1bn).

PCCW is likely to remain the major shareholder of HKT, with its stake reducing from 63.07% to 51.97% post the placement, and will use the raised $1.1 billion to grow its core parent operations, IT Solutions and Media, strategic investments and debt repayment.

The news comes after last week’s announcement that PCCW plans to dispose of its loss-making UK wireless internet provider Relish to Three UK for a $300 million consideration.

The sale of the stake, through its wholly owned subsidiary CAS Holding, is via a secondary placement at HK$10.15 per share stapled unit. This consideration would be $1.1 billion based on the deal price. Equity research at Goldman Sachs, which launched the trade as sole bookrunner, said: “We remain Buy on HKT given improving mobile and broadband fundamentals, and also its robust dividend growth outlook.” It represents the region’s biggest overnight bookbuild in 2017 so far.

Goldman Sachs forecasts “HKT’s mobile postpaid ARPU will grow 3% to 4% per annum in 2017E-18E, driven by a rising mix of high ARPU customers, as the carrier began leveraging its superior network quality after completing the network integration (CSL and HKT) in 3Q16”. On the broadband front, they are also confident as they believe the Hong Kong residential broadband market has become even healthier.

PCCW relied on telecom services for about 82% of revenue last year.