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By Bloomberg

Telstra Corp., Australia’s largest phone company, is in talks to acquire Pacnet Ltd., which operates undersea cables across the Pacific Ocean.

There’s no certainty that any transaction will take place, the Melbourne-based company said in a regulatory statement today, responding to a Bloomberg News report that the two companies are nearing an agreement. Pacnet’s owners were seeking a valuation of about $1 billion including debt, people with knowledge of the sale process said in June.

Buying Pacnet would give Melbourne-based Telstra ownership of more than 46,000 kilometers (29,000 miles) of submarine cable between Asia and the U.S. The Australian operator has sold $2.8 billion of assets in the past year, including Hong Kong wireless carrier CSL New World Mobility Ltd. and a domestic directory business, data compiled by Bloomberg show.

“Globally these sorts of infrastructure assets are highly sought after,” Ross MacMillan, an analyst at Morningstar Inc., said by phone from Sydney.

The deal would help Telstra provide payouts to dividend- hungry shareholders, he said: “To be able to pay that dividend yield they have to have that stable cash flow coming in, and this fits really well with that kind of thing.”

Telstra shares rose 1.2 percent to a one-month high at 3:30 p.m. in Sydney trading.

Corporate Clients

Pacnet’s owners, including Ashmore Investment Management, Spinnaker Capital and Clearwater Capital Partners, are working with Credit Suisse Group AG on the sale, people with knowledge of the matter said in June. The company, with headquarters in Hong Kong and Singapore, is seeking a buyer as competition with regional phone companies intensifies.

Telstra sees “strong growth opportunities” in Asia and wants to boost its offerings to corporate clients in the region, Chief Financial Officer Andrew Penn said in an October presentation. Pacnet spokeswoman Annie Ho declined to comment.

Citic Telecom International Holdings Ltd., a unit of China’s largest state-owned investment firm, had previously weighed buying Pacnet, people with knowledge of the matter said in June.

‘Fragile’ Liquidity

Pacnet considered an initial public offering in 2011 and attempted a separate sale process, people familiar with the matter said earlier. It was formed through the merger of Asia Netcom Corp. and Pacific Internet Ltd.

Moody’s Investors Service cut Pacnet’s credit rating one level in August to B3, citing concerns over its “fragile” liquidity position. Pacnet’s data center business has not yet grown large enough to offset volatility in bandwidth sales, and it has less than $30 million in cash with no back-up bank facilities, according to the Moody’s report.

The company’s earnings before interest, taxes, depreciation and amortization, excluding some items, rose 32 percent to $115.2 million last year after it cut some lower-margin businesses, Moody’s said in a March report. Its sales fell 9 percent to $471.6 million, according to Moody’s.