Telstra, CyberWorks Internet Venture May Find Partner (Update2)
By Thomas Lau
Melbourne, Feb. 7 (Bloomberg) -- Telstra Corp. and Pacific Century CyberWorks Ltd. said they may take on another partner for a joint venture they have set up to build a fiber-optic Internet ``backbone,'' to be called Reach Ltd.
Reach appointed Gerry Moriarty, Telstra's group managing director for infrastructure services and wholesale as chairman for a two-year term, and chose as its chief executive, Alistair Grieve, a former Cable & Wireless HKT Ltd. deputy chief executive.
Bringing in another shareholder to reach would help spread the high cost and risk of building the cable network. Banks are less willing to lend money for Internet backbone projects due to falling prices and high capital spending needs, Moriarty said.
``One of the opportunities to grow Reach is to take in another partner,'' said Moriarty, in an interview. Telstra is not in talks with a potential partner, he said.
In December, Telstra and CyberWorks were borrowed $1.5 billion rather than the $2 billion planned for the Internet venture as bankers balked at the bigger loan. Even with the reduced borrowing, Reach could spend 10 percent to 15 percent of sales on capital investment, Moriarty said.
Moriarty said Prices charged by Reach would ``of course'' fall as competition remained strong. In August, Telstra said Reach would have yearly sales of $1.9 billion and profit before goodwill amortization of $165 million.
CyberWorks and Telstra today also formalized their Regional Wireless Co. and Internet Data Centre Co. ventures, which will formally begin operations tomorrow along with Reach, Telstra said.
Last month, CyberWorks, Richard Li's Internet and telephone services venture, won approval from shareholders to sell telecom assets and bonds to Telstra, Australia's No.1 phone company, raising $3.35 billion it will use to repay debt due next month.
Today, CyberWorks rose 1.1 percent to HK$4.675 while Telstra fell 1.3 percent to A$6.88.
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