Optus Holders Could Learn From SingTel's HKT Bid, Investors Say
quote.bloomberg.com
By Linus Chua
Singapore, March 2 (Bloomberg) -- If history has taught them any lesson, Cable & Wireless Optus Ltd.'s shareholders should choose Singapore Telecommunications Ltd.'s bid for Australia's No.2 phone company over two others, investors said.
Exactly a year after the U.K.'s Cable & Wireless Plc sold its Hong Kong unit to Richard Li's Pacific Century CyberWorks Ltd. for mostly stock -- which has lost 80 percent of it value -- investors say SingTel's likely offer of cash and a much more stable stock might have been better. The same may now hold true for Optus shareholders who are reviewing offers from the Singapore company and rivals Vodafone Group Plc. and Telecom Corp. of New Zealand.
``What's in front of Optus shareholders is cash or a more cash-rich company versus others that don't give you an advantage in terms of a cash component,'' said Cheong Kum Hong, chief investment officer at Commerzbank Asset Management Asia Ltd., which manages $600 million in Asia.
For Optus shareholders, even getting shares of the former Singapore phone monopoly may not be such a bad thing, investors said. As global telecommunications stocks tumbled in the past year, SingTel shares have risen 3.3 percent, the only one of Asia's 15 biggest phone companies to gain.
Telecom New Zealand, whose market value is about half that of Optus, isn't a strong candidate when placed against SingTel or Vodafone, investors said. The bid from Vodafone, the world's largest phone company, might have been the stronger of the two if it were using its own shares. It has said it will use mainly shares of Vodafone Pacific Ltd., its privately held Australian unit. That might not satisfy Cable & Wireless, which is Optus's biggest shareholder, with a 53 percent stake.
``Cable & Wireless Plc is looking for cash,'' said Tjandra Kartika, an analyst at G.K. Goh Research Pte. in Singapore. ``If you're taking something that's not listed, how can you raise cash?''
SingTel, which has more than $4 billion in cash, has been coy about the details of its bid, although analysts say it will likely put in either an all-cash offer or a cash and stock one for Optus.
History's Lessons
A year ago, CyberWorks beat SingTel to take over Cable & Wireless HKT Ltd., Hong Kong's dominant phone company, offering a cash and stock deal worth as much as $38 billion. The bid fell to $28 billion by August as CyberWorks stock fell. Cable & Wireless is now stuck with about 15 percent of CyberWorks shares that are worth a fifth of what they were when it got them.
``There's no question C&W would have been better off taking SingTel's offer,'' said G.K. Goh's Kartika. ``Looking at CyberWorks' price, even if they had taken SingTel's stock, at least it's where it was a year ago.''
Now thrust into the front of a bidding war again, SingTel, which has been conservative in its overseas acquisitions, may pay a little more for Optus than its market value of about $7.5 billion, investors said.
Last week, SingTel Chief Financial Officer Chua Sock Koong told Bloomberg News that the company considers Australia one of Asia's key telecommunications hubs after Japan, Hong Kong and Singapore.
``Clearly, we have big ambitions,'' she said. ``We're prepared to take calculated risks and move when we need to.''
SingTel has stakes in Advanced Info Service Pcl, Thailand's biggest cell phone company, Globe Telecom Inc., the No. 2 mobile phone operator in the Philippines, Bharti Group, one of India's biggest private phone companies and one of four traditional phone companies in Taiwan.
The company is investing in the region to offset growing competition in its home market after Singapore's phone market was opened up 11 months ago. And it may stand to lose more in investor confidence if it doesn't find a way to make this deal one that Optus shareholders can't walk away from.
``SingTel needs to broaden to its horizon but Optus need the best price,'' said Chong Yoon Chou, who helps manage $2.3 billion in Asia for Aberdeen Asset Management Asia Ltd. ``So, they need to find a middle ground.'' |
