China Merchants now owns a 40% stake in the fiber assets of HKT Trust & HK, a unit of PCCW Limited.
According to a PCCW filing, China Merchants' investment arm will pay about USD 870 million for the stake in Regional Link Telecom Services, a wholly-owned subsidiary of HKT that owns Passive Netco and supplies fiber connection services in HongKong and the Greater Bay areas.
Bloomberg Intelligence analysts Marvin Lo and Chris Muckensturm noted that the sale "could be interpreted as a cash call" by PCCW for developing its media business, given that there is no pressing need to raise funds.
Reportedly, the deal comes at a time when organizations are increasing new technology adoptions to capitalize on artificial intelligence. Notably, HKT is the first telecom service provider in Hong Kong to apply the innovative 50G PON technology, further enhancing the performance of its existing fiber network.
Most of the proceeds from the transaction will be utilized for various corporate needs, such as repaying debts and other operational expenses. Additionally, shareholders might benefit as HKT plans to distribute part of the proceeds as special dividends.
PCCW, controlled by tycoon Richard Li, has been selling other stakes, including 26.1% of its video streaming service Viu to Canal+ as well as its data center business to DigitalBridge Group.
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