Telstra & PCCW write down Reach by USD1.6 billion

21 Feb 2003

In an unexpected move Australian telco Telstra [TLS.AX] and Hong Kong’s Pacific Century Cyberworks (PCCW) [PCCW.OLD] have announced that they will write down the value of their 50/50 Reach joint venture by USD1.6 billion. Reach was formed by Telstra and HongKong Telecom in 2000 as a vehicle to sell bandwidth for voice, data and the internet and quickly became Asia’s largest international carrier. However the company has been hit by strong competition in the broadband market and a dramatic erosion of prices. According to Ziggy Switkowski, head of Telstra, neither his company nor PCCW plan to invest anymore money into the company. ‘I am embarrassed by the need to make these writedowns’ Switkowski told investors. Telstra and PCCW are attempting to convince Reach’s creditors to agree to easier terms on a USD1.5 billion loan, after the banks granted it a waiver on debt covenants that expires on 28 February.