Telstra's Pacnet deal shows Australian interest in 'pan-Asian telco reach', says expert

Pacnet is headquartered in Singapore and Hong Kong and provides connectivity, managed services and data centre services across the Asia-Pacific region. Telstra said the deal, which is subject to regulatory approval, is expected to complete in the middle of 2015.

"The attractiveness of a pan-Asian telco reach now clearly extends to Australia – the challenge for such merger and acquisition (M&A) activity is to clear the regulatory hurdles in the different jurisdictions where those valuable licenses are held," specialist in telecoms regulation Bryan Tan of Pinsent Masons MPillay, the Singapore joint law venture partner of Pinsent Masons, the law firm behind Out-Law.com, said.

Telstra chief executive David Thodey said the deal supports the company's goal of developing further into the Asian market.

"We believe this acquisition will help us become a leading provider of enterprise services to multinational companies and carriers in the region,” Thodey said in a statement. "The enterprise services market is evolving rapidly and Pacnet will strengthen our networks; data centres and submarine network as well as boosting our service offerings and people capabilities."

Hong Kong-based technology and telecoms expert Paul Haswell of Pinsent Masons said the deal could prompt a flurry of other M&A deals in the market.

"Telstra have been working hard to make inroads into the Asian telecoms and IT market, diversifying their offerings and seeking to prove that they can compete in markets which are often dominated by just a small number of key players," Haswell said. "With this acquisition they have raised the stakes considerably, instantly becoming a major player across a number of Asian markets."

"It will now remain to be seen whether their competitors opt to consolidate by way of response, or whether they will seek to rely on innovation to fend off what they will likely see as a serious threat. Whatever they choose it will be likely be good news for both customers and the industry," he said.

Telstra's deal covers the acquisition of Pacnet's joint venture share in PBS, a company licenced to network and data centre services in China.

Pacnet chief executive Carl Grivner said of the deal: "The addition of Pacnet’s subsea fibre network, data centre assets, capability in China, and dedicated employee base to Telstra's world-class infrastructure and management will give it the ability to accelerate business growth in the region. There is a tremendous opportunity for this combination to address the growing demand for services throughout the Asia-Pacific region and provide superior solutions and service to customers."