Deals and IPOs

Australia's Telstra to sell Hong Kong unit for $2 billion

Australia's Telstra has agreed to sell its Hong Kong mobile phone business to a company controlled by billionaire Richard Li for A$2 billion ($1.8 billion), in a deal expanding the scion's grip on the city's telecom market.

Australia's biggest phone company said in a filing that it had agreed to sell its 76.4 percent stake in its CSL business to HKT, a listed arm of Li's PCCW media conglomerate.

Telstra Chief Executive David Thodey said it was the right time to capitalize on the success of its CSL business, which has recorded compound annual revenue growth of 9.4 percent over the past three years.

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"There are a number of dynamics in the Hong Kong mobiles market that means this is the right opportunity for Telstra to maximize our return on this successful asset," Thodey said in a statement.

HKT will also buy the remaining stake in CSL held by Hong Kong-based New World Development, the property developer controlled by the family of billionaire Cheng Yu-tung, according to the filing.

(Read more: China Mobile's offer rings of Apple deal)

HKT is Hong Kong's top telecoms company, which together with its parent PCCW, provides the city with its quadruple-play platform: fixed line, broadband internet, television and mobile. Excluding certain customers and re-sellers, HKT said the combined market share of HKT and CSL New World Mobility in the local mobile market was estimated at 31 percent.

Thodey said Asia remained an important part of Telstra's strategy and the company intended to be in the region for the long-term. Telstra shares were up 0.9 percent at A$5.16 in a broadly higher market at 02:00 GMT.

Telstra owns a controlling stake in Autohome, the owner of Chinese car sales websites, that listed on the New York Stock Exchange earlier this month with a market value of around $3.2 billion.

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"It is interesting considering they're looking at an Asian-expansion story, to be selling out of their Hong Kong division, but the price and what they're getting for it does seem appealing," Evan Lucas, a market analyst at IG, said of the HKT deal.

Lucas said it did raise questions about releasing an asset that was a good foothold into China, but on balance it is "a very nice pick-up and good for shareholders".

(Read more: Is Hong Kong's real estate market taper proof?)

HKT Ltd will also buy the remaining 23.6 percent of the CSL business that is currently held by New World Development, bringing the total value of the deal to $2.43 billion.

Telstra said the sale of CSL is expected to generate a profit of around A$600 million, with net proceeds incremental to the company's free cashflow guidance of A$4.6 billion to A$5.1 billion in 2014.

The deal is subject to regulatory approval in Hong Kong. HKT said in a statement that it saw no significant competition concerns related to the deal. The company said as part of its application to the Communications Authority, HKT has voluntarily offered certain pro-competition measures.

Richard Li is the younger son of Asia's richest man, Li Ka-shing - a rags-to-riches property tycoon with a vast business empire across Greater China and other parts of the world. Richard is also in the process of expanding into the insurance industry, having agreed this year to buy ING's Hong Kong, Macau and Thailand insurance units for $2.14 billion.

(Read more: Apple's smartphone market share quadruples in China)

The Li family's business empire spans property, ports, power, water, supermarkets, drug stores and is spread across 52 countries.