SingTel Needs New Friends

Advanced Info and Bharti Airtel first became the carrier's associates at least seven years before the iPhone.
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Singapore Telecommunications badly needs fresh ideas, or at least some new friends. The decision to pay S$2.47 billion ($1.8 billion) for additional stakes in wireless businesses in Thailand and India shows why.

Advanced Info Service and Bharti Airtel, in which SingTel is increasing its economic interest, first became the carrier's associates at least seven years before the iPhone and a decade ahead of WhatsApp. While it might be loyal to renew vows with long-standing partners, there's no harm in flirting with businesses of a newer vintage to generate growth.

Shareholders, however, gave a mild thumbs up to the deal. And why shouldn't they? Going by SingTel's history of acquisitions, the ticket size is indeed large. But investors, who mainly buy the stock for its 4.1 percent dividend yield, have little reason to worry. There will be no change to the payout policy, CEO Chua Sock Koong assured them.

SingTel And Friends

Bharti shares have underperformed over the past five years

Source: Bloomberg

*In U.S. dollar terms.

Besides, it's all in the family. The stakes in Intouch, the controlling shareholder of Advanced Info, and Bharti Telecom, Bharti Airtel's largest owner, are being handed over to SingTel by its controlling shareholder Temasek, which is also helping to part finance the acquisition by buying new SingTel shares at an 8.4 percent premium to the past year's average price.

Any residual dilution concerns are easily trumped by the comfort of having a powerful backer like Singapore's state investor increase its 51 percent ownership. It's not clear why Temasek won't hang up on Singapore's telcos -- it has direct and indirect exposure to all three. But SingTel has no reason to complain about having Temasek in its corner, considering the fourth operator that's coming online will likely intensify price competition for 4G data services in the city-state.

Even so, a preoccupation with old friends isn't entirely healthy, especially if it comes in the way of cultivating new ones. SingTel's largest acquisitions to date have been in Australia's Optus, state-owned Indonesian carrier Telekomunikasi Selular, Pakistan's Warid Telecom, as well as Bharti and Advanced Info. Of those, the Pakistan foray turned out to be a dud, and SingTel sold its stake in 2013, the same year it failed to land a Myanmar license.


SingTel has invested heavily in Indian, Indonesian and Thai partners, but little in new markets or technology

Source: Bloomberg

With the exception of Trustwave, a U.S. cyber-security company it acquired for $810 million last year, and Amobee, a mobile advertising platform it purchased for $321 million in 2012, there's hardly anything on SingTel's shopping list from the last decade that kindles optimism about a growth revival.

With Thailand's mobile market slowing, Intouch probably won't provide that expansion, although at least its shares carry a 7 percent-plus dividend yield and have risen 57 percent over the past five years in Singapore-dollar terms. Formerly known as Shin Corp., Intouch will probably soon enter Thai textbooks for being caught up in a 2006 coup that ousted then Prime Minister Thaksin Shinawatra and has defined that country's politics ever since.

There's more to make SingTel feel its age. Just when Tencent and Foxconn Technology Group are pumping money into Kavin Bharti Mittal's Hike Messenger, India's newest unicorn, SingTel is still accumulating shares in the company founded by Mittal's dad. That alone should convince the Singapore carrier it needs to hang around young entrepreneurs more, and make some friends.

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

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

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

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