Why unknown ISQ bought HGC for $1.9bn

A private-equity investor you’ve probably never heard of now owns HGC. Alan Burkitt-Gray asks CEO Andrew Kwok about the changes and the opportunities this brings

Andrew Kwok is clearly enjoying himself. He’s at last been recognised as CEO of the operation that he’s effectively been running for 15 years. And he’s the acknowledged telecoms expert for his company’s new owner, a US-based private equity company that has bought the business for $1.9 billion.

That was I Squared Capital (ISQ), and you can be forgiven for knowing nothing at all about it. We didn’t either when it was first mentioned in July 2017 as a potential bidder for Hutchison Global Communications (HGC), then the international carrier and local fixed-line business of Hong Kong’s CK Hutchison.

Now, rebranded as HGC Global Communications, the company has started on a new era as an independent operator. The deal means “we are the showcase to attract more capital into the telecoms industry”, says Kwok. “I Squared Capital wants to make this company as successful as possible.”

HGC operates business and consumer fixed-line services and public WiFi services in Hong Kong and is an international carrier serving international telecom operators and internet service providers. 

It owns and operates an extensive fibre network, including four routes across the border into China that are integrated with the mainland’s tier-one operators. It connects them with hundreds of international operators.

The company says the deal will reinforce its position in Hong Kong and beyond by strengthening its full-fibre infrastructure network to support new technology, such as 5G. It will also invest in valued-added services and innovative solutions, including software-defined applications, integrated cloud and network security solutions for its global customers.

HGC “is not a totally new company”, says Kwok in an interview with Capacity. The “well-known brand” has largely been retained but there is “a shift of ownership that will bring it to the next level”, he adds.  

Why did Hutch sell the operation? Kwok won’t answer the question – he’s no longer with Hutch, of course, and can’t speak for the former owner, whose origins go back to the nineteenth century. 

But instead he points to statements made at the time the deal was announced in July 2017. Then, CK Hutchison said it will use the funds to invest in its mobile businesses – Hutch runs the mobile operations branded Three around the world, from Australia to Ireland. 

“It is a pure business decision,” he adds. But he’s clearly looking at the possibilities ahead. “My investor is supportive of expansion,” he says. “Our mutual position – HGC and I Squared Capital – is that we will grow in whatever way makes sense to the business.” 

Market tap

Looking at ISQ’s figures (see box, right), the HGC purchase price represents almost a quarter of the funds it had expected to raise by the end of 2017. The same presentation reports other significant investments that are all much smaller: a $285 million pipeline network in New Mexico, a $1.2 billion energy network in Latin America, and a €1 billion electricity company in Ireland, plus an unpriced hydroelectric company in the US. 

“In the ISQ portfolio we’re the first telecoms operator investment,” says Kwok. But ISQ is investing on behalf of financial investors that focus on infrastructure and, by moving into telecoms, it is introducing a new source of funding to the telecoms industry. And, he points out, “a lot of financial companies are interested in our services”. 

But there’s a second benefit, he adds. “The investment is bringing us into new areas of industry. It gives us the opportunity to tap into their markets.” And ISQ is “introducing us already” to these other sectors. ISQ is “very well connected” and people “are ready to listen a lot”, says Kwok. And the third benefit? The culture, he says. “ISQ treasures people. The philosophy is work hard and play hard.” 

All in all he’s looking forward to the wider exposure of HGC to the investment sector and to infrastructure companies, companies that, he hopes, “will treat us as a business partner”. 

What makes ISQ tick? Though it relies on investment in “traditional infrastructure”, says Kwok, he sees that it is also interested in “new infrastructure on top of traditional infrastructure”. 

This seems to fit well with his vision: “With the increasing globalisation, personalisation and fragmentation, our world is entering its ‘fourth industrial revolution’ where we will participate and drive the change,” he says. 

There must be a downside to cutting HGC adrift from the rest of Hutch, which has 11 mobile operators around the world as well as a solid industrial reputation in its Hong Kong home. He agrees that “leaving the Hutchison family” has its regrets. “We have to thank them for their past support. Hutchison is a great company,” he adds. 

“Hutchison is still very supportive, even though we are now an individual company. It’s still a close partner and a supportive customer. There are contractual-binding obligations on both sides. It is not a buyer/supplier relationship, but it is a mutual benefit that has proved to be successful.”

But on the other hand, he agrees, the newly independent HGC “can address a wider market”. How? Kwok is reluctant to be explicit, but says: “We are taking this opportunity to expand our addressable market.” Perhaps some of Hutchison’s competitors were doubtful about forming business links with the old HGC? This is an area Kwok didn’t want to pursue, and this is simply my interpretation of the background. So let’s move on.

What about the benefits of the transaction to HGC’s customers? “When we completed the transaction on 3 October [2017], we had already promised to all of our customers that we would keep all our commitments, whether verbal or written down. This is still a commitment.” 

But there’s another side to potential expansion: acquisition. Kwok again is reluctant to go into detail. “We are revisiting the return-on-investment model – what is short-term and what can be long-term. We have our targets and one thing we bear in mind is that this is a long-term business,” he says.

Even though ISQ is still a young business, it wants long-term investments, “and we want to make this company [HGC] as successful as possible and follow the ISQ criteria”, says Kwok. 

HGC’s staff will benefit from this, too, he says, because of ISQ. “We will share success and failure together, and ISQ has a culture of incentivising performance across the company.”

What’s his five-year vision for HGC? “We want to make full use of communications to enable a better life for people.” He’s clearly enthused by the idea of being ISQ’s telecoms person on call. 

Does that mean he will be spending more and more time in Manhattan? “It’s already happening – so long as I can put in 48-hour days,” he says,

“But I’m happy, as a veteran in the industry, that I will be telling the telecoms story to the financial market and helping to attract new investment.” 


I Squared Capital has a rather opaque, one-page website, so it’s hard to find much about it. The only information on the site is a New York address and a list of cities: Houston, London, New Delhi, Hong Kong, Singapore. 

Looking deeper, you’ll find a report in Infrastructure Investor magazine that 

I Squared Capital raised a $3 billion infrastructure investment fund in 2015, and later in the year added $200 million from the US government’s Overseas Private Investment Corporation (OPIC). 

The group was formed in 2013 by several former Morgan Stanley executives, including Sadek Wahba, former head of Morgan Stanley’s infrastructure fund.

The second 2015 funding from OPIC was destined for middle-market infrastructure investments in south and south-east Asia. 

According to Infrastructure Investor at the time, Wahba said: “South and south-east Asia infrastructure will require enormous investment in the coming decade to keep pace with economic development.”

ISQ says it is “an independent, employee-controlled investment platform focused on global infrastructure investments”, and it invests in energy, utilities, transport and telecoms in North America, Europe and high growth economies, such as India and China. It manages assets of $8 billion, including $3 billion from 2015 and $5 billion it is “targeting to raise” in 2017. That’s why the $1.9 billion for HGC is so significant for ISQ. 

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