Companies And Markets: Telstra's HKT Buy Looks Extravagant
Christine Lacy
03/30/2001
Australian Financial Review
Page 46
Copyright of John Fairfax Group Pty Ltd
Telstra Corp's $1.68 billion acquisition of a 60 per cent stake in the mobile business of Hong Kong Telecom is looking increasingly expensive compared with market valuations for rival European and Asian telecommunications companies.
According to the results for HKT, released with Pacific Century CyberWorks ' disastrous $US886 million ($1.8 billion) annual loss on Wednesday, Telstra paid a top-line multiple of about 18.4 times for its controlling stake.
This contrasts with a trading multiple for European wireless counterparts of about 15 to 16 times, revealing that Telstra appears to have paid up to 20 per cent above market for its regional wireless presence.
Singapore Telecommunications, in its $17.2 billion takeover for full-service carrier Cable & Wireless Optus in Australia, has paid about 13 times the group's forecast top-line operating earnings of about $1.4billion this financial year.
PCCW shares fell HK42cents, or 12 per cent, to a record low of $HK3.05 after the company revealed a total consolidated loss of $US886 million in the year to December 31, compared with expectations of a loss of up to $US350 million.
The greater than expected loss followed the group's $US627 million in net unrealised losses during the year, which flowed from its internet investments.
Earnings were also slashed by $US302 million in net interest charges, the result of the cost of funding the company's $US32 billion purchase of Hong Kong Telecom last year.
Unaudited pro forma financial data provided to show results for HKT to the year's end reveal that the island wireless business generated earnings before internet, tax, depreciation and amortisation of $US152 million in the year and revenues of $US663 million.
Telstra Corp paid $US1.68 billion for its 60 per cent stake in that operation under its wider $US1.81 billion strategic alliance with the group.
This equated to a value for the total mobile group of $US2.8 billion, which, based on the latest top-line operating earnings, equates to a multiple of about 18.4 times.
Telstra, also a full-service carrier (distinct from HKT mobile's status as a pure wireless play), is trading at an EBITDA multiple of about 9 times, based on annualised top-line profits of up to $12 billion and a market value of almost $100 billion.
Telstra shares ended 3cents weaker at $6.49.
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