Pacnet still eyeing off local telco buy

Barney, who navigated Asia Global Crossing through a Chapter 11 bankruptcy in the dotcom era to build regional pipe kings Asia Netcom, has only just convinced the last shareholders in Pacific Internet to come into his fold after his company launched a hostile takeover for the ISP in 2007.

But Barney isn't done yet. He told journalists today he is keen on more acquisitions in Australia, seeking smaller wholesale players or other telcos with inter-city networks.

Barney confirmed AAPT as one option, but said "it is one of six or seven possibilities of companies that might fit the profile."

Pacnet owns some US4.6 billion worth of cables in the Asia-Pacific region and employs 1200 staff in 26 markets.

Its CAGR revenue growth may have fallen from 22 per cent last year to a 14 per cent this year, but Barney says this is quite respectable at a time when most telecommunications operators are experiencing negative growth.  

 "We are sitting on a lot of cash on the balance sheet," Barney said. "And it is a buyer's market for these kinds of assets."

That said, he doesn't feel that current market values for Australian telcos - especially those with high debt to equity ratios - reflect the deepening financial crisis.

In the 2001 crash," you could buy just about any company at auction," he said.

"In Australia this time around, we haven't been successful at getting valuations to come into line with market realities."

Barney does not think regulation will hamper his acquisitive plans.

"Compared to every other market in Asia outside of Japan, Australia is one of the easiest places in the region to do business in," he said.

A Government-subsidised National Broadband Network, however, might well throw a spanner in Pacnet's plans.

While it will "open up lower cost access to the last mile", Barney was unsure an NBN is the right way to spend tax-payer money in Australia.

"First, you have to figure out if there is a problem," he said.

"Australia's broadband prices are not that bad. And if it costs billions to improve that by twenty of thirty per cent, you have to question that.

"Do people have the stomach to spend that kind of money on faster broadband instead of say, healthcare? Especially if it only improves speeds incrementally to what existing providers already offer?"

"The Government could achieve the same result by allowing all the players to access [Telstra's] exchanges," he said.

"That would create great outcomes for end users, but also make Telstra an unprofitable company.  Telstra employs a lot of people."

Barney said the proposed NBN will make a trivial difference to Australian broadband when compared with the cost of getting capacity to and from Australia.