Three-way battle for SingTel, M1 and StarHub

It’s going to be a three-way battle for SingTel, M1 and StarHub as competition intensified with the entry of a new player in the telco industry. Against this backdrop, will SingTel acquire M1 or StarHub? Recent developments in Singapore’s telecommunication industry suggest that such consolidation is only a matter of time for the incumbent players.

With Australia’s TPG winning the fourth telco license in both Australia and Singapore, it is imperative that SingTel take decisive actions to defend market shares. It is now or never for SingTel.

The battle of the giants

With a gigantic market capitalization of $63 billion, SingTel is obviously the leader of the pack and is in pole position to gobble up either of the two smaller players. Among the three existing players, M1 has the smallest market capitalization – $1.75 billion. Since 2015, M1’ share price crashed from a high of $3.96 to $1.88 level. With the current form, M1 could easily fell prey to a hostile takeover.

Incidentally, M1’s substantial shareholders, Keppel Corp and Singapore Press Holding (SPH) are going through hard times as well and they may be tempted to offload their shares in M1 to SingTel. Keppel Corp may want to sell its stakes in M1 and raise capital to focus its fight against the slump in the oil-rig industry.

On the other hand, media conglomerate SPH is facing a disruption in the media industry brought forth by digital technologies. In light of the disruption, SPH may want to dispose its stake in non-core assets like M1 to invest in digital media companies for revenue growth.

Temasek Holdings’s game

Sovereign wealth fund Temasek Holdings owns shares in all the above-mentioned Singapore companies and thus could be instrumental in kick-starting the game of musical chairs among the companies. Together, both Keppel Corp and SPH own a combined stake of 32.6% in M1. Assuming that Keppel Corp and SPH agreed to sell their stakes to SingTel at current price, the telco would only need to cough up about $1.18 billion of cash to acquire all the remaining shares. For SingTel, this sum is actually not considered a huge sum of money.

According to SingTel’s Q4FY17 results, the free cash flow for FY2017 was a whopping $3 billion. In addition to that, the recent divestment of NetLink NBN Trust has raised $1.095 billion of cash for SingTel. With so much war-chest, SingTel has more than sufficient fund to launch an all-out hostile takeover of M1.

For StarHub, things are slightly more complicated. Through Singapore Technologies Telemedia, Temasek Holdings [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

Read my other articles on SingTel:

1. SingTel’s NetLink Trust IPO application approved
2. SingTel at a cross road
3. Short selling on SingTel shares
4. SingTel shares to rocket on NetLink Trust IPO?
5. SingTel share in supreme form
6. SingTel increased investment moat aggressively

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