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Asia Netcom to upgrade submarine cable network
China Netcom Group Corporation (Hong Kong) has agreed to sell its regional submarine cable network operator, Asia Netcom, to two investment funds - Ashmore Emerging Markets Liquid Investment Portfolio and Spinnaker Global Opportunity Fund Limited - for $US169 million.
Asia Netcom, headquartered in Hong Kong, provides submarine cable capacity, international data and voice services to multinational corporation and telecom carrier customers mainly in the Pan Asia-Pacific region.
No reason was given for the sale. China Netcom's announcement quoted its chairman, Mr Zhang Chunjiang, saying only that China Netcom would maintain its business relationship with Asia Netcom for its international operations, including the purchase of capacity by China Netcom from Asia Netcom, and that bother parties would "cooperate in good faith to explore potential future business partnerships and opportunities".
Asia Netcom was formed early in 2003 to buy Asia Global Crossing a subsidiary of the failed global cable operator Global Crossing. Investors were China Netcom, Newbridge Capital and Softbank Asia Infrastructure Fund. The price paid was around $US120 million, and the buyers provided new debt funding of around $US150 million.
Asia Global Crossing was formed in 1999 with a $US2 billion investment from five organisations, including Global Crossing as majority shareholder. Its plan was to build a high-capacity regional submarine network and make money selling capacity to meet what was expected to be rapidly growing demand.
The company had an IPO in early 2000 and borrowed an additional $US400 million from bondholders to complete its network. However with demand growth less than anticipated and with prices plummeting it ran short of cash and when a $US400 million debt facility to be provided by Global Crossing (suffering the same problems as its Asian subsidiary but on a grander scale) was withdrawn Asia Global Crossing had to find new investors.
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