Infrastructure investor sparks bidding war for HKBN

• China Mobile tabled a takeover bid for HKBN last month
• But I Squared Capital is also now in discussions to acquire the Hong Kong-based broadband network operator
• The infrastructure investor would seek to merge HKBN with HGC Global Communications, which it acquired in 2017

A telecom sector bidding war has broken out in Hong Kong, with broadband network operator HKBN (Hong Kong Broadband Network) the subject of M&A interest from multiple parties. 

China Mobile last month made a non-binding cash offer to buy HKBN, with local reports suggesting the value of the offer was around HK$6.5bn (US$835m). 

Now, I Squared Capital, the private infrastructure investment firm that already owns HGC Global Communications (formerly known as Hutchison Global Communications), has joined the fray with a “non-binding preliminary indication of interest,” noted HKBN in this statement to the Hong Kong stock exchange. HKBN and I Squared Capital are now discussing “the terms of the proposal,” including the value of the offer. Trading in HKBN’s shares were suspended by the Hong Kong stock exchange following news of the latest bid. 

According to Bloomberg, which cited sources with knowledge of the negotiations, I Squared Capital is considering an offer of between HK$6.5bn and HK7.8bn (US$835m and US$1bn). 

This isn’t the first time I Squared Capital has explored the possibility of bulking up its existing Hong Kong operations by snapping up HKBN – the companies held talks last year but couldn’t agree on a price. At the time, other private equity firms, including Hong Kong-based PAG and international private equity giant KKR, were also believed to have shown interest in HKBN, while IDG Capital also expressed interest in HKBN earlier this year (according to Bloomberg), so it’ll be interesting to see if any other firms are spurred into renewed action by the current offers. 

HKBN has an extensive fibre access network that passes almost 2.6 million residential households (of the country’s 2.67 million total) and more than 8 million commercial premises: It recently became the first operator in Asia Pacific to launch a 25G/bits broadband service. It ended August this year with 907,000 residential fixed broadband customers, giving it a market share of about 30%, and 110,000 enterprise broadband customers. Both of those customer numbers were down slightly year on year in what is a very competitive market, with the likes of PCCW (HKT), SmarTone and dozens of specialist ISPs all vying to attract customers. 

HKBN reported full fiscal year revenues (for the 12 months to the end of August 2024) of HK$10.65bn (US$1.37bn), down 9% year on year, with the slump mainly due to much smaller volumes of handset and other end user device sales. Full year earnings before interest, tax, depreciation and amortisation (EBITDA) was up 3% to HK$2.36bn (US$303m). 

- Ray Le Maistre, Editorial Director, TelecomTV