Australian telco Telstra has confirmed it will buy Pacnet, an Asian operator with a 46,000km undersea cable network, as well as data centers in China and around the Asia Pacific region, for $697 million (AUD $856.5 m).

Telstra, Australia's largest telecoms company, is planning to expand its business services and Asian offerings. Pacnet, which is owned by a private investor group, owns the EAC-C2C and EAC Pacific cables and 100 points of presence. It also has some 24 data centers in the region, and is the only foreign company licensed to provide data center network services in China, operating through a joint venture, Pacnet Business Solutions (PBS).

Buying network muscle
The size of the deal is smaller than the $1 billion which had been rumored. Pacnet is mostly an addition to Telstra's already substantial international network operation, but the company is keen to get more wide-area network ability. It is handing over its original business, Australia's fixed line phone network to a government owned fibre operator. a move which leaves it with plenty of money (around $4bn) and a need to diversify. Despite being cash rich, Telstra has chosen to use $400m of dept to part finance the Pacnet acquisition.

"Asia is an important part of our growth strategy," said a statement from Telstra chief executive David Thodey. "We believe this acquisition will help us become a leading provider of enterprise services to multinational companies and carriers in the region".

Pacnet was formed in 2008 from the merger of Pacific Internet and Asia Netcom, and has focused on building out its international network, under the leadership of Asia Netcom leader William (Bill) Barney.  In 2012, Indonesia's largest telecommunications operator Telkom Indonesia wanted to buy Pacnet for $1 billion, but the deal fell through.

Around that time, Barney was dropped as CEO to be replaced by Carl Grivner, the former CEO of US telco XO.

"The addition of Pacnet's subsea fibre network, data centre assets, capability in China, and dedicated employee base to Telstra's world-class infrastructure and management will give it the ability to accelerate business growth in the region," said a statement from Pacnet chief executive Carl Grivner.

 The deal is subject to regulatory approval authorities, and is expected to be completed by mid-2015.