SingTel

SingTel: The IDA has approved SingTet’s acquisition of an indirect 100% stake in OpenNet, though to prevent anti-competition, SingTel will not be able to influence mgt and major operational decisions of OpenNet. As background, SingTel will own CityNet, a trustee-manager of NetLink Trust, which in turn will acquire 100% of OpenNet from Axia NGNetworks, SP Telecoms, SPH and SingTel, for an aggregate consideration of $126m. Specifically for SingTel, its original 30% stake in OpenNet will be sold for a consideration of $37.8m. Nevertheless Deutsche does not expect material divestment gains on the back of the latest transaction. With the termination of existing service and lease agreements with OpenNet, SingTel will cease to book an estimated $55m in annual revenues from OpenNet going forward. But the net impact on SingTel’s earnings will be minimal, given the OpenNet revenues were merely passed through to NetLink Trust under the previous structure. Deutsche believes a more interesting development would be SingTel’s obligatory divestment of NetLink Trust (to <25%), which, under this proposal, has been extended to Apr 2018 (from Apl 2014). Assuming a 76% stake divestment and NetLink Trust value at $1.89b (as per SingTel’s initial sale of assets into the business trust), this would imply total sale proceeds of $1.44b. Further assuming full shareholder return of these proceeds, a special dividend of up to 9¢ per SingTel share appears possible. The house maintains its Buy rating and TP $4.30.