CyberWorks, Telstra Venture Seeks Singapore Telecom License
By Cathy Chan
Hong Kong, June 21 (Bloomberg) -- Reach Ltd., one of Asia's biggest providers of wholesale long-distance voice and data phone services, applied for a Singapore license as part of plans to rely less on Hong Kong and Australia for sales.
The company, owned by Pacific Century CyberWorks Ltd. and Telstra Corp., will probably soon receive a permit to sell international voice and data transmission to local companies, said Dulcie Chan, a spokeswoman for Singapore's Info- Communications Development Authority.
Reach aims to reduce reliance on CyberWorks and Telstra, which are expected to give Reach 90 percent of their wholesale business this year providing about 35 percent of the joint venture's sales, according to a company document.
``They need to diversify risk and exposure to certain markets,'' said Bill Sung, a fund manager at CDC IXIS Asset Management Asia Ltd., which owns Telstra and CyberWorks stocks. ``Both Telstra and CyberWorks may experience slowing growth.''
A license in Singapore, with only 3.9 million residents and $3.3 billion in annual telecom sales, may be the first step to permits in Malaysia, Indonesia, Thailand and the Philippines. Reach wants 25 percent of Asia's wholesale phone traffic by 2005, and may also invest in Japan, Korea, Taiwan and China.
The company borrowed $1.5 billion in December to expand a network that includes stakes in more than 50 phone cable systems, including control of Asia Pacific Cable Network 2 project.
``Singapore is a question mark and its outgoing traffic isn't huge,'' Sung said. ``I'd be concerned if they're putting too much investment in this.''
Singapore
On June 15, there were 29 so-called facilities-based operators in Singapore, including a venture between Telstra and Keppel Telecommunications & Transportation Ltd., according to the regulator's Web site. Licensees pay an annual fee of 1 percent of sales and post a bond equal to 5 percent of planned investment.
``While the market is in early stage of deregulation, there are other companies vying for market share, aside from CyberWorks,'' said Billy Chan, who manages more than $4 billion in Asia ex-Japan for Invesco Asia Ltd.
The Singapore government is processing Reach's application, under which the company may also have requested the right to provide leased-line and mobile phone services, said Chan, the spokeswoman for the regulator.
Reach wouldn't comment on the license application. ```It's commercially sensitive,'' said Craig Leeson, a company spokesman.
Sliding
Telstra, Australia's largest phone company, halved its forecast profit growth for the year through June because of slowing economic growth and increased competition at home. Prices for leased lines to China are also falling, CDC's Sung said.
Wholesale prices may slide by half worldwide in the next two years as new cables laid by Global Crossing and Level 3 Communications Inc. come on line, creating an oversupply of broadband capacity, analysts said.
Reach was formed in February after CyberWorks, controlled by Richard Li, the son of billionaire Li Ka-shing, bought Cable & Wireless HKT Ltd., Hong Kong's largest phone company. Reach told bankers its earnings before interest, taxes, depreciation, and amortization to rise about threefold to $1.4 billion in 2007.
CyberWorks shares fell 3.1 percent yesterday to HK$2.35. The stock, once an Internet darling, has slumped 85 percent in the past 12 months. Telstra shares rose 0.6 percent to A$5.48.
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