CITIC pays $1.16 billion to C&W and Portugal Telecom for Macau stakes

China’s CITIC Telecom has paid $1.16 billion to acquire a 79% stake in Macau’s largest telecoms operator from Cable & Wireless Communications (C&W) and Portugal Telecom.

State-backed CITIC (Hong Kong) already held a 20% stake in Companhia de Telecomunicacoes de Macau (CTM) but was eager to gain control of the growing business.

China’s CITIC Telecom has paid $1.16 billion to acquire a 79% stake in Macau’s largest telecoms operator from Cable & Wireless Communications (C&W) and Portugal Telecom.

State-backed CITIC (Hong Kong) already held a 20% stake in Companhia de Telecomunicacoes de Macau (CTM) but was eager to gain control of the growing business.

Its purchase of shares from C&W (London, UK) and Portugal Telecom (Lisbon, Portugal) leaves Macau Post as the only remaining shareholder, with a stake of just 1%.

CITIC will pay $749.7 million for the 51% stake held by C&W and $411.6 million for the 28% of the company owned by Portugal Telecom.

“The Group has been placing great emphasis on Macau as a strategic market,” said Xin Yue Jiang, the chairman of CITIC Telecom. “The increase of CITIC Telecom’s stake in CTM facilitates our long-term business expansion, generates solid synergies with our business integration and enables us to realise higher business growth.”

CTM made HK$898.2 million ($116 million) in net profit in 2011, compared with HK$783.8 million in 2010, and reported net profit of HK$446.4 million for the first half of 2012.

CITIC operates mainly in the wholesale market and sees the takeover of CTM as an opportunity to become more of an “end-user-focused services provider”.

It plans to increase investments in areas such as cloud computing and network convergence, and says it will also develop a 4G network in Macau following the transaction.

CITIC intends to fund the takeover through a mixture of existing cash resources and new bank loan facilities, but the deal still requires the approval of the Macau Government and Chinese regulatory authorities.

Keen to reduce debt and focus resources on its Caribbean stronghold, C&W was reported to have begun talks over the sale of its stake in CTM back in October.

At the time, a sale was thought likely to generate between $600 million and $650 million for the UK-headquartered operator – substantially less than the agreed figure.

Meanwhile, the $411.6 million paid to Portugal Telecom will provide some relief for the struggling operator, which has been hit by the downturn in its domestic market.

In the third quarter of 2012, Portugal Telecom reported a 28.8% year-on-year decline in net profit, to €63.7 million ($85 million), with revenues down 6.2%, to €1.6 billion.

Portugal Telecom will also benefit from entering into a three-year strategic alliance with CITIC, aimed at sharing expertise and collaborating on ICT investment opportunities.