SingTel Stands to Get Forex Gain in Any Optus Satellite Sale

Singapore Telecommunications Ltd. (ST) stands to benefit from a 45 percent rise in the Australian dollar against its home currency in any sale of the Optus Satellite division it bought in 2001.

A strengthening of the Aussie over the past decade left revenue at the unit 41 percent higher last year in Singapore dollar terms than it would have been without the change in exchange rates. The unit of Southeast Asia’s largest phone company may be worth as much as A$2 billion, Nomura Holdings Inc. estimates.

SingTel, as the Singapore-based company is known, said yesterday that it had appointed Credit Suisse Group AG and Morgan Stanley to conduct a strategic review of the unit. Potential buyers include European and north American satellite companies, such as Intelsat Global Holdings SA, Eutelsat SA, SES SA, and Inmarsat Plc, as well as infrastructure funds, said Jeffrey Tan, an analyst at OSK Holdings Bhd.

“Those names are trying to widen their footprint in Asia,” Tan said by phone from Kuala Lumpur. “The Asian satellite operators are busy ramping up their own capacity” so are less credible buyers, he said.

Optus Satellite’s revenue was A$222 million during its 2001 financial year, according to statements filed during Cable & Wireless Optus Ltd.’s takeover by SingTel. That was worth S$206 million in SingTel’s home currency, based on the exchange rate used during the takeover.

The A$319 million of revenues the division recorded in 2012 was worth S$417 at the company’s reported exchange rate for that year, 41 percent more than the S$295 million that would have resulted at 2001 rates.

Aussie Gains

The Australian dollar traded at about 1.296 Singapore dollars as of 6:15 p.m. Tokyo time, about 45 percent more than on March 16, 2001, the day Singtel announced its A$17 billion ($17.6 billion) takeover proposal for Cable & Wireless Optus, which included the satellite business.

“No decision has been reached on the future plans for the business,” Michele Batchelor, a spokeswoman for SingTel, said by e-mail. “The Optus Satellite business remains a strong performer and good investment.”

A sale will face hurdles because of the national security implications of selling satellites that carry Australia’s defense communications, said Simon Morris, a Melbourne-based partner with Corrs Chambers Westgarth who’s given legal advice on cross-border transactions. It would also need to be approved under U.S. rules on the export of satellite technology.

Defense Signals

“Everyone reads the headlines saying ‘The next war’s going to be an I.T. war’,” he said by phone. “In that sense it’s understandable why there’d be concern over anything that relates to communications or I.T.”

Approval of the deal would pass through the Foreign Investment Review Board, a government agency that approves overseas purchases of Australian assets, Morris said. While it probably wouldn’t need a separate defense review, as relevant government agencies are consulted as part of the Board’s usual process, it would attract more scrutiny because of the nature of the business, he said.

“Anything that is defense-related, there’d be another layer over that,” he said. That would reflect “China-type concerns.”

Huawei Technologies Co., China’s largest maker of telecommunications equipment, has been excluded from public tenders on a state-owned national broadband network being built in Australia. The decision was taken “in the national interest,” Prime Minister Julia Gillard said last March.

Luke Coleman, a Sydney-based spokesmen for Huawei, declined to comment.

’Cyber Intrusions’

Optus Satellite’s C1 orbiter carries communications for Australia’s military, including secure messages and imagery that’s sent to troops out of sight of Australia’s coast, according to a 2003 statement by the country’s defense minister.

Australia’s Defence Department needs to provide written consent “before any change in the interests of the satellite can take place,” according to an e-mailed statement from the ministry. All its contracts relating to the satellite will expire by the end of this year and the department is evaluating tenders for future services from Optus, according to the statement.

Cyber security has become a sticking point in bilateral talks between China and the U.S. National Security Adviser Thomas Donilon said March 12.

“Cyber intrusions emanating from China at a very large scale” are threatening to derail U.S. President Barack Obama’s efforts to improve ties between the countries, Donilon said. Such accusations were groundless and China itself is a victim of hacking attacks, Premier Li Keqiang said March 18.

“The scale of certain countries’ cyber operations and the nature and level of those intrusions have been substantial,” Ross Babbage, a Canberra-based security consultant and former Australian defense adviser, said by phone. “This has not facilitated trust in foreign investment.”

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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