SingTel Mulls Sale of Stake in Australia's Optus

­Singapore Telecommunications (SingTel) is reported to be considering the sale of a minority stake in its Australian subsidiary, Optus. The move could raise between US$4 billion and US$5 billion, two people familiar with the situation told the Wall Street Journal.

The people said the plan is still at an early stage and that no final decision has been made, with nothing expected to happen until late 2010 at the earliest.

It is expected that the funds would be used to invest in emerging markets.

"There's not too much money to be made in Australia; it's a mature market and competition is very intense," the person said. "Right now SingTel is thinking of selling a minority stake, but this can change depending on market conditions."

In a recent ratings report, Fitch warned that the company is facing increased competition in the local market. Hutchison Telecom and Vodafone agreed to merge their Australian networks earlier this year in a move to cut costs and boost their ability to gain customers.

Vicky Melbourne, Senior Director in Fitch's Asia-Pacific TMT team wrote, "Optus' challenge in the coming years will be to continue to extract growth from its mobile division, which has historically been the growth engine of the business, in view of Telstra's strong market position and also likely greater competition from a potentially stronger third player in light of the recent merger announcement by Vodafone Australia and Hutchison Telecommunications Australia. Positively, the decision by the government to not proceed with any of the national broadband network bids, removes near-term uncertainties surrounding the financial impact associated with the project, had Optus been the successful bidder."

Based on figures from the Mobile World subscriber tracker, Optus ended June 2009 with around 8 million mobile phone subscribers, compared to market leader Telstra with 10.2 million, and the merged Vodafone-Hutchison's 6.6 million.

SingTel brought Optus in 2001 for US$15.5 billion. Optus also operates landline, ISP and cable TV services.

On the web: Wall Street Journal - Mobile World

Posted to the site on 1st November 2009