Telstra and PCCW bankroll Reach reorganisation

15 Apr 2003

Australian telco Telstra and its Hong Kong counterpart PCCW have revealed that they will each pay around AUD150 million to help restructure the reported AUD1.5 billion debt burden of their submarine cable joint venture Reach. Under the deal, Telstra and PCCW will each commit to purchasing 90% of their international capacity requirements from Reach until 2010. In return for the cash injection from Telstra and PCCW, Reach’s bankers have agreed to extend the deadline for repayment of the outstanding AUD1.2 billion by two years until 2010. Reach has suffered from the global malaise of bandwidth over-capacity and falling wholesale prices and has been discussing restructuring options with its bankers since the start of the year. In February Telstra wrote off its entire investment in the joint venture, whilst PCCW wrote down goodwill on its half share. The combined value of the write-offs was estimated at AUD1.6 billion.