263 Network Communications to acquire 50% of iTalk

Chinese internet and communications company 263 Network Communications announced Wednesday that it will acquire a 50% stake in US telecom service provider iTalk Global Communications, state media reported. It is rumored that 263 may pay US$14.6 million for iTalk shares. The transaction would mark the first expansion of a private Chinese telecom service provider into a foreign market. At present 263 operates a higly profitable IP telephony service, including voice conferencing. Expanding Voice over Internet Protocol (VoIP) services in China is part of 263’s long-term strategy, but at present the service is not available as state-owned telecom operators fear VoIP will compete with their traditional telephony services. iTalk is the US’ third largest provider with revenues of US$200 million in 2008. iTalk’s CEO said the deal will help drive iTalk’s expansion outside of North America; it has tried and failed to raise funds for growth from venture capital firms.