Singapore's Keppel leads bid for M1 in telecom shake-up
M1, Singapore's third-largest mobile provider, warned that "continuing the status quo risks stagnation and further decline in shareholder value." Â© Reuters
SINGAPORE -- Change is afoot in Singapore's hotly competitive telecommunications industry, as companies brace for the financial demands of next-generation networks and a new rival moves in.
State-backed conglomerate Keppel Corp. on Thursday said it intends to buy a majority stake in M1, the city-state's No. 3 mobile telecom operator. Singapore Press Holdings, publisher of the country's top newspaper, will join Keppel in the deal.
Keppel already owns 19.33% of M1, while SPH holds 13.45%. Through buyout offers to existing shareholders, they aim to take the remaining shares.
The offer price is 2.06 Singapore dollars per share, according to the announcement, 26% higher than the last closing price of SG$1.63. Based on this valuation, the buyout would be worth as much as SG$1.3 billion ($951 million) if Keppel and SPH acquire the rest of the shares.
The move comes as already tough competition grows even fiercer. A fourth provider, Australian wireless operator TPG, is set to enter Singapore by the end of the year.
M1 is facing "intensifying competition and industry disruption from the impending launch of a fourth mobile network operator," the company said in Thursday's statement. "Continuing the status quo risks stagnatio n and further decline in shareholder value."
Moreover, providers are facing massive investments in infrastructure for fifth-generation, or 5G, wireless services.
M1 controls about 18% of Singapore's mobile market in terms of revenue, according to research by DBS Group Holdings. That puts it behind Singapore Telecommunications, at 52%, and StarHub, at 30%.
Although M1's net profit for the first half of 2018 remained almost unchanged from a year earlier, at SG$71 million, its share price had dropped 8.4% this year, compared with a 4.2% decline in the benchmark Straits Time Index.
In the circumstances, M1 aims to strengthen its position under the government-backed conglomerate, which already has telecom-related operations.
"Through majority control, we would, together with SPH, be better able to support M1's management to drive changes and create greater value in the company," Keppel chief executive Loh Chin Hua said in a stat ement.
M1's restructuring may take "several years," during which "dividends from the company could be affected," according to the announcements.
One factor to watch is whether Malaysian telecom company Axiata Group will accept the offer. Axiata owns 28% of M1, making it the largest shareholder. And as Axiata is 37%-owned by Malaysian state fund Khazanah Nasional, the company's response would likely reflect the Malaysian government's wishes.
On Thursday, Axiata released a statement. "The offer should reflect the accurate future value of M1, inclusive of an acceptable control premium. We will continue reviewing all options available to us in relation to our shares in M1."
While this deal concerns Singapore, telecom markets are heating up across Southeast Asia.
One example is the Philippines, where the government plans to open the country to a new provider through an auction in November. The market is currently dominated by two players, PLDT and Globe Telecom.
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