Singapore's Temasek Holdings plans to join MBK Partners in a bid to buy a 45 per cent stake in PCCW's media and telecoms unit HKT Group Holdings, the South China Morning Post reported on Monday.
PCCW, the Hong Kong phone company controlled by billionaire Richard Li, said last month it expects to shortlist bidders for its newly formed HKT Group within a month, in a deal that could fetch more than $2.5 billion.
Sovereign wealth fund Temasek and South Korean private equity firm MBK declined to comment on the matter, the article said, citing unnamed sources.
PCCW had announced plans in May to fold its core media and telecoms businesses into the new unit and sell 45 percent.
Reuters reported last month that the Blackstone Group and Providence Equity Partners were among the private equity firms pursuing a stake in HKT.
Sources also told Reuters TPG Capital and Australia's Macquarie Group are pursuing a bid.
The South China Morning Post reported on Monday that the tie-up between MBK and Temasek comes as other interested parties begin sounding out partnership possibilities.
The article said a bid by state-controlled SingTel in 2000 for a controlling stake in what became HKT's parent PCCW caused alarm in Hong Kong and Beijing. Li stepped in soon afterwards with a winning bid.
The newspaper said that while PCCW had indicated that it wanted sole expressions of interest in the first round of the transaction last month, it is widely expected that funds will form pairs or larger consortiums once notified that they have made it on to the shortlist for the second round.
That had been expected last week but was pushed back to the next few days as PCCW moves ahead slowly with the transaction, the article said.
It said interested parties expect a month or so of due diligence following the shortlist and a preferred bidder selected by the end of September.