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Pacnet, which was formed earlier this year from the combination of Asia Netcom, once part of China Netcom, and Pacific Internet, would finance its unsolicited offer with cash and equity, said the source, speaking on condition of anonymity.
AAPT trails Australia's two leading phone companies, Telstra Corp Ltd and Optus, the local arm of Singapore Telecommunications.
Telecom bought AAPT in 1999 at the height of the dotcom boom, but has since been forced to write off more than NZ$2 billion ($1.1 billion) in value, leaving it with a book value of just NZ$270 million ($146 million).
Telecom and AAPT declined to comment.
The source said Pacnet was interested in AAPT's capacity to round out its broader Asia network as it eyes a potential initial public offering as soon as next year.
A deal would be one of few sizeable mergers in Asia in recent months, as companies shy away from acquisitions amid economic uncertainty that has prompted many to sit on cash despite attractive valuations.
At its annual meeting in October, Telecom NZ told shareholders its funding was secure, and it had seen little effect from the global downturn.
Telecom's earnings have been under pressure as increased government regulation and a gradual migration away from fixed line phone services have dented its margins.
AAPT's first-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) fell 24 percent due to lower revenues and higher costs. Telecom said last month it expected AAPT's EBITDA for the year to June to be A$70-A$90 million.
Applying the EBITDA multiple on which Telecom is trading, AAPT's enterprise value at the top end of the forecast range would be $313 million, putting Pacnet's offer at a 34 percent premium, at least.
In January 2007, Telecom bought PowerTel for A$357 million ($232 million) to expand the reach of AAPT and challenge Telstra and Optus.
Telecom has previously said it is open to offers for AAPT, but maintained the unit has strategic value by providing a trans-Tasman service to its New Zealand corporate customers.
Pacnet said in May it was planning to list on Nasdaq in either the fourth quarter of 2008 or first quarter of 2009, but recent market turmoil has slowed IPO traffic as candidates wait for the situation to settle.
Some of Pacnet's core assets come from its early origins as Asia Global Crossing, which boomed and then went bust during the Internet bubble. Its assets were later acquired by Chinese fixed-line carrier China Netcom, which renamed it Asia Netcom.
(Additional reporting by Denny Thomas in SYDNEY)
(Editing by Ian Geoghegan) ($1=1.820 New Zealand Dollar) Keywords: x
(doug.young@thomsonreuters.com; Reuters Messaging: doug.young.reuters.com @reuters.net; +886 2 2508-0815)
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