Optus faces tough call as SingTel left hanging on line
By Kevin Morrison
The biggest poker game in corporate Australia reaches a critical point today with Singapore Telecommunications threatening to walk away from its $17 billion takeover offer for Cable & Wireless Optus if there is no agreement reached.
Optus has said that no decision will be made today.
The story so far
• Dec 12, 2000: SingTel and Vodafone emerge as frontrunners for Cable & Wireless's 52pc stake in Optus.
• Feb 17, 2001: SingTel confirms Optus takeover bid.
• Mar 9: Bids close with SingTel seeking 100pc of Optus; Vodafone and Telecom NZ the other bidders.
• Mar 15: SingTel threatens to withdraw $4.50 per share offer over slow response from C&W.
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So either SingTel is bluffing, or it is serious and walks. If it does abandon the talks, this leaves Optus and its 52.5 per cent shareholder Cable & Wireless plc with only one bidder remaining, Vodafone Pacific.
If so, Vodafone, which is understood to be willing to pay more than the $4.50 per share SingTel is prepared to pay for Optus, no longer has a competing bidder, thus removing the need for it to pay a higher premium for Optus.
Vodafone could then offer no more than $4.50 per share, or less.
Even worse for Optus chief executive, Mr Chris Anderson, and his UK boss Mr Graham Wallace, the chief executive of Cable & Wireless plc, is that the Australian Competition and Competition Commission could reject the Vodafone proposal within a week.
If this is the case, then Mr Anderson and Mr Wallace no longer have an auction, which will flatten the Optus share price.
Some fund managers have said Optus could fall to about $2.50, as its share price has been propped up by auction, making it almost immune from the downturn in telecom share prices. Optus closed trading Friday at $4.13.
So far it appears Mr Wallace is prepared to call SingTel's bluff, with sources close to the company saying that Cable & Wireless plc is prepared to wait for the ACCC decision, which is expected within the next two weeks.
An industry source said SingTel would not wait for the ACCC to decide.
"They [Cable & Wireless plc] can wait for the ACCC but we will not be there," the source said.
However, the Singapore Government made a surprise move last week by saying it was prepared to give up control of SingTel. Its political influence has been a barrier to SingTel's expansion in the region and its willingness to sell down its 78 per cent stake was taken as a sign that SingTel and its major shareholder were very keen on the carrier buying Optus.
SingTel wants to keep Optus intact, while Vodafone is interested solely in the mobile business and plans to sell the data business to Cable & Wireless, with the consumer business also to be sold.
Vodafone Pacific spokeswoman Ms Michelle Hindson said Vodafone would not do anything ahead of the ACCC decision. Putting the mobile operations of Vodafone and Optus together would create a mobile operator the size of Telstra's. Vodafone intends to on-sell one million of Optus's customers to Hutchison Telecommunications Australia.
However, speculation has emerged that Vodafone may be working on an alternative plan to appease ACCC concerns on industry concentration, as Vodafone is proposing effectively to remove one of the five mobile operators from the market.
Industry sources said that under the new proposal, Vodafone would pass on more than one million Optus customers to Hutchison, which in turn would sell its Orange One mobile network to Telecom Corp of New Zealand.
Hutchison has confirmed that it has spoken to the NZ carrier but no agreement has been reached.
Telecom NZ has also expressed an interest in Optus's consumer business should Vodafone buy Optus mobile. |
