FOCUS: SingTel unlikely to be allowed to buy MobileOne
2001-04-11
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Singapore Telecommunications Ltd is unlikely to be allowed to acquire MobileOne Asia Pte Ltd as such a move would be against the government's telecom liberalisation policy, analysts said.
Absorption of MobileOne, the second largest local mobile phone operator, would give SingTel around a 90 pct share of the mobile phone market in Singapore, they said.
Although the acquisition would make some sense for SingTel as it would eliminate domestic competition, it would also create unnecessary duplication of resources between SingTel and MobileOne's mobile phone networks, they added.
Business Times newspaper quoted SingTel Mobile CEO Lucas Chow as saying that the company would bid for MobileOne if allowed to do so.
"We are in the process of checking whether we are allowed to bid. If we are allowed to bid, we are definitely interested," he said.
SingTel's expression of interest followed a joint announcement last week by the shareholders of MobileOne -- Singapore Press Holdings, Keppel Telecomunications & Transportation, Cable & Wireless PLC and Pacific Century Cyberworks Ltd -- that they are in talks on a possible joint sale of their holdings in the company.
A spokeswoman for the InfoComm Development Authority of Singapore told the Business Times that any change in MobileOne's shareholding structure would be evaluated by the regulator to ensure that it does not unreasonably restrict competition.
SG Securities analyst Michael Millar said he does not think any acquisition by SingTel of MobileOne would be allowed by the IDA as it would go against the government's liberalisation policy.
"The IDA will not allow this. They will practically have 90 pct of the mobile phone market," Millar said, adding that such a move would also "create unnecessary duplication of network infrastructure."
He said SingTel could just be making noises to highlight to investors that "Cable & Wireless Optus is not the end of the road for them."
SingTel last month made an agreed offer for C&W Optus at an effective price of 3.94-4.23 aud per share or 14.90-16.0 bln aud. SingTel shares have fallen sharply since the announcement, with the market considering the bid expensive.
Another analyst with a regional brokerage said SingTel is better off acquiring telco assets in North Asia where the company has negligible presence.
SingTel holds a stake in Hong Kong's APT Satellite but this asset does not bolster SingTel's quest to become a truly regional telecom operator.
"They need to have something on the ground to bolster their regional ambitions... Rather than buy MobileOne, they have other potential assets they can acquire in North Asia," he said.
Among possible acquisitions would be Korea Telecom, Smartone in Hong Kong, KDD in Japan and a cellular operator in Taiwan, he said.
The analyst said he suspects SingTel is not seriously considering bidding for MobileOne.
"They are probably talking up the market since after all if someone else overbids for MobileOne, that will make people realise that SingTel's value must be higher than what the market currently thinks," he said.
The regional mobile joint venture formed by PCCW and Telstra Corp has also expressed interest in acquiring MobileOne.
The regional brokerage analyst said by acquiring MobileOne, SingTel will impede its capability to chase other potential acquisitions elsewhere.
"They need to pay cash for MobileOne and I estimate MobileOne could be sold for close to 2.0 bln usd," he said.
Analysts estimate that the acquisition of C&W Optus, if completed, would not only wipe out SingTel's net cash of close 6.0 bln sgd but will also raise the company's gearing, depending on the final structure of the deal.
Under the SingTel offer, C&W Optus shareholders have been given three choices, including an all-share compensation, a share and cash compensation, and a share, cash and bond compensation.
SingTel has said it aims to raise its gearing to 30 pct to finance its acquisitions.
Vickers Ballas analyst Terence Tan said an acquisition by SingTel of MobileOne would make sense as it would help eliminate domestic competition but only if the price is right.
"It also depends on the price to be paid if it makes economic sense," he said, adding that while the market has been estimating the price of MobileOne at around 3.0 bln sgd, he believes a fair price should be around 1. 50 bln sgd.
Tan said it remains to be seen whether the IDA would allow the deal.
Should the deal push through, Tan said he would not be overly concerned if SingTel's gearing breaches the company's target of 30 pct, as long as Singtel's cashflow can absorb the additional debt burden.
Kim Eng Securities analyst Stephanie Wong, who also does not think IDA will allow the deal, said that allowing Singtel to own MobileOne would dampen the competitiveness of StarHub's mobile services because StarHub operates on the GSM 1800 band and that band provides for only a limited scope of roaming.
Should SingTel be allowed to buy MobileOne, she said a purchase price close to 2.0 bln sgd would be a fair price.
jb/jw
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