Deal focus: Advantage rings up TeleGuam return

It was this association that inspired Japanese mid-market GP Advantage Partners to reach beyond its domestic remit to acquire GTA TeleGuam, Guam's former state-owned telecommunications company, in 2010. The seller was another PE firm, Shamrock Capital Advisors, which privatized the business six years earlier.

"Because we believed there is natural connection between the two geographies we thought we would be best placed to develop the business," explains Takeshi Sasaki, a director with Advantage who sat on TeleGuam's board. "Also, the Japanese telecom industry is already highly advanced, so there was an opportunity to support them through our connections at home."

At the time of investment, Advantage identified two areas of growth. Firstly, TeleGuam had offered a range of services across telephone, internet, and pay-tv, but it was still predominantly a fixed phone-line business. There was a clear need to expand its mobile and broadband network. Secondly, Guam was awaiting the arrival of more than 8,500 US Marines from Okinawa in Japan, meaning a big influx of potential customers. TeleGuam required the infrastructure to cope with this growth.

"It is a very capital intensive business, so there was a lot of capital expenditure to grow the wireless service, build antenna towers and put in a fiber optic cable network," says Sasaki.

The amount of infrastructure investment during Advantage's stewardship has not been disclosed, but TeleGuam claims that $70 million has entered the business over the past seven years. Advantage has also overseen a number of milestones, including the expansion of the firm's 4G LTE network and negotiation of low roaming rate agreements with overseas networks, including SoftBank in Japan.

TeleGuam now operates across four keys areas - fixed phone line, broadband, pay-tv, and wireless services - and revenue has increased 20% in the last four years. The company will now be bought by strategic player Telkom Indonesia, pending regulatory approval.

Telkom will be TeleGuam's first non-private equity owner in a decade. The two companies already have a year-long business relationship, stemming from joint efforts to develop the South East Asia United States submarine cable system, which will build capacity to meet the growing demand for bandwidth between Southeast Asia and North America.

"Telkom's is currently looking to expand out of Indonesia and this deal is a key step for them," says Sasaki. "TeleGuam will be the front-runner for strengthening Telkom's international business."

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