Lehman's Milliken on SingTel's Share Price Drop: Comment
By Linus Chua
Singapore, March 13 (Bloomberg) -- Peter Milliken, an analyst at Lehman Brothers Ltd. in Hong Kong, comments on Singapore Telecommunications Ltd.'s stock price decline. SingTel shares suffered their biggest one-day drop in 11 months on speculation it would pay a fifth more than Cable & Wireless Optus Ltd.'s market price last Friday. Some analysts were expecting a 5 percent to 10 percent premium.
``(SingTel) could buy into operations in developing Asia and sit around for years to see the results. By buying Optus, it gets scale immediately and would have to be taken seriously as an Asia Pacific operator.
``They get purchasing scale when they go to equipment vendors. They also get one major customer to join up in its C2C network. Other than that, there isn't a whole lot.''
C2C is a $2 billion undersea cable SingTel is building with partners across Asia, which will carry more traffic than any other pan-Asian pipes.
On the likelihood of SingTel overpaying:
``The management of SingTel is not stupid -- they never overpay for a major acquisition. To think they're paying a premium to market without a solid plan on how to realize value, you're probably jumping to the wrong conclusion.
``SingTel is not the sort of company that gets into a bidding war.
``It has put a price which it thinks it can win, yet where it can still add value to SingTel. If it has to trump a high Vodafone price, I'd expect it to walk away, just as it walked away from the PCCW-HKT acquisition.''
SingTel's biggest rival in the Optus bid is Vodafone Group Plc, which may pay more to boost its position as the third-biggest mobile operator. Optus has a third of Australia's cell phone market.
One year ago, SingTel lost out to Internet start-up Pacific Century CyberWorks Ltd. in a $28 billion purchase of Cable & Wireless HKT Ltd., Hong Kong's biggest phone company. CyberWorks shares have fallen 81 percent in the past year while SingTel has fallen 10 percent.
On whether it may end up with another failure if it doesn't outbid Vodafone:
``I would consider that a very cynical view. If you want to expand by acquisitions, anyone can do that. If you want to add value to shareholders, you have to walk away from some opportunities. If investors consider it a mistake, then they think differently from me.''
Milliken rates SingTel shares ``underperform'' because they've have already outperformed its rivals, making its valuations higher than others.
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