Singapore Telecom has $6.4B in cash; France Telecom has 7M mobile users
July 13, 1999
Heard in Asia
Singapore Telecom Plans
Buyback, Boosting Shares
By SARA WEBB
Staff Reporter of THE WALL STREET JOURNAL
Share buybacks are all the rage in Singapore.
Singapore Telecommunications Ltd., the giant telephone company, on
Sunday announced that it plans to return about $2.5 billion Singapore
dollars ($1.47 billion) to its shareholders in the current financial year,
ending March 31, 2000, by means of a share buy-back program and the
payment of a special dividend.
The news boosted Singapore Telecom's share price, which jumped 5.5%,
or 16 Singapore cents, to close at S$3.06 on Monday, up from Friday's
close of S$2.90. By comparison, the key Straits Times Index rose 17.15
points, or 0.8%, to end at 2198.78 points on Monday.
Singapore Telecom is not alone in wanting to be able to buy back its
shares. Ever since changes were made to the Companies Act last
November allowing Singaporean companies to perform share buybacks,
several companies have proposed amending their own corporate codes so
that they can purchase their stock.
Setting a Trend
Media group Singapore Press Holdings Ltd. came up with a plan in May
that would enable it to buy back up to 10% of its shares at a discount to
the market, while investors who sold their shares to the company would
get a tax credit. Development Bank of Singapore Ltd. said earlier this
month that it would follow the trend with its own share buyback plan, and
there's speculation that other big cash-rich Singapore companies will
follow suit.
But is this good news for investors? Analysts and management consultants
tend to agree that it's a wise move if a company is sitting on a big pile of
cash and can't find a more rewarding way to invest its money. A share
buyback can also indicate that the company's management considers its
stock price to be undervalued; buying back the shares helps boost
earnings-per-share and also can help lift the stock price.
"All companies should have the opportunity to buy back their stock for a
variety of reasons," recommended Jim Hildebrandt, managing director of
Bain & Co. in Hong Kong. In today's financial markets, "Share buybacks
have become the vehicle for CFOs [chief financial officers] to manage the
cash flow and the mix of capital; it's a natural evolution."
'Nice Tool'
Share buybacks are "a nice tool to have instead of keeping cash on the
balance sheet," said Brett Schiedermayer, a manager at the Boston
Consulting Group in Singapore. That's because companies can sometimes
run up a huge pile of cash and then find they can't spend it. As a result, Mr.
Schiedermayer said, "Cash on a balance sheet is worth less than when it's
doing something," while share buybacks are a sign that the company is
actively managing its balance sheet. Overall, it's a sign of a more mature
market, he said.
Despite the financial crisis that swept across much of Asia beginning two
years ago, several Singaporean companies avoided the pitfalls of heavy
borrowing and now find they are sitting on large cash hoards.
"Singapore companies are fairly cash-rich," said Sin Mui Tan, head of
Singapore research at Merrill Lynch. Indeed, Singapore Telecom said
Monday that it has about S$6.4 billion in cash, while Merrill estimates that
Singapore Press Holdings has about S$1.2 billion in cash.
In some cases that money may be earmarked, in part, for acquisitions. In
January, Singapore Telecom acquired a 20% stake in Thai cellular
company Advanced Info Service, and the company stressed Monday that
it will continue to look for acquisitions overseas.
Spending Spree
DBS has already been on quite a spending spree since the Asian financial
crisis began, snapping up a big stake in Thai Danu Bank, acquiring Kwong
On Bank in Hong Kong, and merging with Singapore's Post Office
Savings Bank, or POSBank.
But analysts say it's harder for a company such as Singapore Press
Holdings to expand through acquisitions, given the politically sensitive issue
of ownership in much of the region's media.
Institutional investors say they would prefer to receive cash rather than
have it just languishing on the company's balance sheet.
"If the company actually can use its cash to buy businesses which have an
equally high rate of return, that is much better for the investor," said Khiem
Do, head of Asian equities at Baring Asset Management in Hong Kong.
But, Mr. Do added, "From time to time, companies are not able to find
investments which enhance their return on equity; then what should they do
with the cash? If the best solution cannot be implemented, the second best
solution is to buy back shares," he said.
As Ivan Tan, company spokesman at Singapore Telecom, explained, the
company has no debt, and with interest rates at low levels now, it can
easily borrow money cheaply if it needs to make a big acquisition. Instead,
it makes more sense to return some of its cash to shareholders so that they
can use the money as they wish. "There's an opportunity cost to
shareholders; they can use the money to invest in the stock market," said
Mr. Tan.
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July 13, 1999
Itineris Is Set to Beat
Its Subscription Goal
By a WALL STREET JOURNAL Staff Reporter
PARIS -- France Telecom SA's mobile-phone unit currently has over
seven million subscribers and looks set to beat its year-end target of 7.5
million customers by a wide margin, the company said.
Itineris has gained over 1.53 million new subscribers so far this year, and
has boosted subscriptions sevenfold in the past three years, the company
said. Itineris is France's leading mobile-phone service provider, with
market share of around 50%.
Bouygues Telecom, France's third-largest wireless operator, last week
said that its mobile-telephone service had topped two million clients. The
company, which is partly owned by Bouygues SA, announced its one
millionth client just nine months ago.
Of France's population, 23.1% had wireless telephone service at the end
of May, while the number of French people using mobile phones rose 36%
between Dec. 1, 1998 and June 1, according to France's telecom
regulator. |
