Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

A Qatari company just gave Singapore's state investor a solid clue about what to do with its outsize holdings of the island's telcos: sell, and run.

Ooredoo QSC, the Doha-based phone carrier, is working with HSBC to find a buyer for its indirect stake of about 14 percent in Singapore's StarHub, Bloomberg News reported this week.

The reason why Ooredoo may want out -- to focus on the Middle East and other fast-growing markets -- has a message for Singapore's Temasek, which for the fiscal year ended March 31 saw its assets shrink for the first time in seven years.

Temasek indirectly owns 42 percent of StarHub. On top of that, it directly controls 51 percent of rival SingTel.

There's more. Temasek also holds 16 percent of a unit of Singapore rig-builder Keppel, which owns 19 percent of M1, the smallest of the city-state's three telcos.  The three investments amount to direct and indirect ownership of almost S$38 billion ($28.1 billion) of market value, a huge exposure to a fading industry.

Past Their Prime
Singapore telcos' returns on equity have fallen over the last two decades
Source: Bloomberg
*Weighted by market capitalization.

The time to own these telcos was 20 years ago, when they routinely garnered returns on equity in excess of 30 percent. That's now fallen to 17 percent.  SingTel failed to land a Myanmar license in 2013, even as Malaysia's Axiata found a way into Nepal last year.  With not much room left for growth, the telcos are returning money. Their dividend-payout ratio has risen to average 74 percent, from 30 percent in the mid-1990s.

Fourth Player Is Coming
New entrant may offer unlimited data to challenge all three; M1 most at risk for not having TV content
Source: Bloomberg Intelligence
*Telecom subscriber market share.

But even cash cows can't be milked forever. More competition is on its way in the form of a fourth operator. Customers are hoping that a keener contest would bring in unlimited data plans, which are already the norm in places like Taiwan. Returns on equity for Taiwanese telcos are down to 13 percent. Singapore might also be heading that way.

Earlier this year, Bloomberg reported that Temasek was weighing the possibility of Keppel divesting its holding of M1 shares to brace for a multiyear funk in the oil-rig sector. Ooredoo's move underscores the need for a more dramatic exit.

Elevated asset prices mean elusive returns. GIC, which manages a part of Singapore's foreign-exchange reserves, on Thursday reported a decline in its 20-year real rate of return to 4 percent, from 4.9 percent. China's sovereign wealth fund last week announced an annual loss.

Clearly, Temasek needs to retool its portfolio toward riskier, high-growth opportunities. It won't necessarily find those in public markets, and definitely not in the telecom business of a city of 5.5 million that since 2011 has had 1.5 SIM cards per person. It's time for Temasek to hang up.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects shareholding structure in fifth paragraph.)

  1. Ooredoo owns about 25 percent of Asia Mobile Holdings, which in turn holds 55.8 percent of StarHub, according to the Singapore-based company's annual report.

  2. Singapore Technologies Telemedia, which has the 75 percent of Asia Mobile Holdings the Qatari telco doesn't control, is wholly owned by Temasek.  

  3. Temasek's indirect ownership of M1 amounts to a little more than 3 percent, according to Bloomberg-compiled data.

To contact the author of this story:
Andy Mukherjee in Singapore at

To contact the editor responsible for this story:
Katrina Nicholas at