Singapore Willing to Cede Control of SingTel, DBS, Others
Singapore, March 14 (Bloomberg) -- Singapore said it's willing to cede control of some of its largest companies such as Singapore Telecommunications Ltd. and DBS Group Holdings in moves that will likely bolster their ability to expand overseas.
The government's control of large Singapore groups, through its holding company, Temasek Holdings, has been a hurdle to their expansion in Asia. Temasek's assets carry a market value of about S$53 billion ($30 billion), or about 27 percent of the combined value of every company on the Singapore Exchange.
``We do not regard these as strategic stakes to be permanently held,'' said Deputy Prime Minister Lee Hsien Loong in Parliament. ``We're prepared to reduce significantly our stakes in SingTel and DBS over the medium term.''
The actions will help the companies pick up assets across the region, many of which have become inexpensive as political and economic concerns have slashed their values. The Singapore government owns 78 percent of SingTel and 47 percent of DBS.
``The fact that the government will lower shareholdings will lower the political sensitivity and perception that the Singapore government is trying to buy (other companies)'' said Seah Hiang Hong, head of research at Kim Eng Securities Pte. ``Some of these issues in the past have been obstacles behind the ability of these government linked companies to strike deals; they're addressing these issues now. ''
In further moves to relax control, the government said it was willing to let foreigners occupy more than half the boardroom seats at its five local banks, to encourage consolidation and external alliances in the industry.
``In many industries, the scale of economic activities is increasingly global,'' Lee added. ``To be competitive and have growth potential, companies need to transcend national boundaries especially in a small economy like Singapore.''
SingTel
In the most dramatic evidence that Singapore is serious about ceding control, Lee said the government will give up its so-called special golden share in SingTel, which gives it the right to veto major decisions in the company.
The move comes just as SingTel has put in its bid to buy Cable & Wireless Optus Ltd., Australia's second-biggest phone company.
With a large state stake in SingTel, Optus ``shareholders would be worried decisions would be made not for purely business sense, but using a political rationale,'' said Bertrand Bidaud, director of Asia Pacific telecommunications research at Gartner Group Advisory Ltd. in Singapore.
The government's holding in SingTel was widely blamed for the failure of Southeast Asia's largest phone company's attempt to buy stakes in companies in Hong Kong and Malaysia.
SingTel failed a year ago to buy Cable & Wireless HKT Ltd. HKT's U.K. parent, Cable & Wireless, rejected the SingTel bid and sold Hong Kong's dominant phone company to Pacific Century CyberWorks Ltd., an Internet start-up run by Richard Li, son of Hong Kong billionaire Li Ka-shing. SingTel also failed last year to buy part of Time Engineering Bhd., which manages Malaysia's biggest fiber-optics network.
DBS was also in merger talks last year with Australia's Westpac Banking Corp. The Australian Financial Review had said Westpac, the country's oldest bank, wanted a substantial and equal stock swap with DBS. The talks failed.
The new rules may help foreign investors get bigger pieces of Singapore banks. Allied Irish Banks Plc, Ireland's largest lender by assets, may be able to buy a quarter of Keppel TatLee Bank Ltd., Singapore's fifth largest bank. Allied Irish bought a three- year option in 1999 to buy the stake for S$351 million.
To be sure, Lee said the central bank will want to ensure there is a ``strong and meaningful'' Singaporean presence on the board of directors.
Other Sales
In the cards, are also sales for the government's port operator, PSA Corp Ltd., and its electricity supplier Singapore Power Ltd.
Lee today also said the government is still keen to sell shares in PSA Corp and Singapore Power, though they may be delayed due to the weak market conditions.
PSA last year said it may want to sell as much as a quarter stake to investors for up to S$3.75 billion ($2.1 billion), by May this year.
``We'll have to judge the timing, the timing is a tactical decision,'' said Lee, who added the shares sale ``will not be a long drawn out process''.
-- Tan Hwee Ann in the Singapore newsroom (65) 212-1581 or at hatan@bloomberg.net, with reporting by Natalie Olynec/vr
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