D-day approaches for Optus
By Virginia Marsh
Published: January 17 2001 21:57GMT | Last Updated: January 18 2001 00:26GMT
After more than a year of speculation over its future, D-day for Cable & Wireless Optus, Australia's second largest telecoms group, is fast approaching.
By early next month potential buyers of the group - which is majority-owned by Cable and Wireless of the UK and has a market capitalisation of some A$14bn (US$7.8bn) - must submit their binding offers with a preferred bidder expected to emerge by end-February.
Formed in 1991 and floated in November 1998, Optus is the only full-service operator with sufficient scale to compete with Telstra, the partially-privatised former monopoly that still accounts for more than 70 per cent of the Australian telecoms market.
But a global re-rating of telecoms stocks has seen its share price fall from a peak of A$7.84 last year to below A$4 and competition in the local sector is intensifying, particularly for its valuable mobile business.
With mobile penetration in Australia tipped to exceed 60 per cent by mid-year, Deutsche Bank is predicting revenue growth for the wireless sector of 13 per cent this year, against 18 per cent in 2000.
But the sale of the Optus mobile business is a unique opportunity for the smaller operators jostling to build a position.
Vodafone Pacific, the local subsidiary of the UK mobile giant which is ranked third in the Australian wireless market with a share of 19 per cent, and Telecom New Zealand, have emerged as the frontrunners since Optus formally put itself up for sale in November.
Optus' mobile business, Australia's second largest with 3.41m subscribers and a market share of 33 per cent behind Telstra's 46 per cent, is by far the group's most valuable asset. Most analysts estimate its worth between A$12bn-A$15bn out of a valuation for the group of up to A$20bn. The group's other two divisions are business and data and consumer and multimedia.
How serious Vodafone's interest is remains unclear. Some UK-based observers suspect it is merely taking advantage of the auction to look through its competitor's books.
In Australia, however, Vodafone's interest is seen as genuine, although a deal that would combine the second and third operators may not gain regulatory approval.
Telecom NZ, the only group publicly to state its intention to bid for Optus, had looked the early favourite for the mobile business. But it has suffered a significant setback with the decision of NTT DoCoMo, Japan's largest mobile operator, to withdraw from the auction. The two had been planning to share the purchase of Optus' mobile arm.
Structuring a deal on its own will be much more difficult for the cash-strapped group which has only just completed the takeover of AAPT, Australia's third largest carrier.
However, the New Zealand group could still come out a winner if Hutchison Whampoa, enters the fray.
The Hong Kong group has been stepping up its involvement in Australia, last year splashing out A$670m on spectrum for its fledgling local telecoms operation. ABN Amro last week suggested that if Hutchison were to bid for Optus it could onsell its existing operation, which is rolling out a CDMA network, to Telecom NZ.
The other main contestant is Singapore Telecoms, the Singapore carrier keen to expand out of its domestic market and thwarted last year in its attempt to buy Cable & Wireless HKT, which was C&W's other main business in Asia-Pacific.
It would lack the synergies of the other potential bidders but has the cash to launch a bid and, unlike Vodafone and Telecom NZ, appears interested in all of Optus's three divisions.
However, C&W, which holds nearly 53 per cent of Optus, might decide to retain business and data, in line with its global strategy. |
