SingTel wins C&W Optus and looks for more Asian deals

SingTel wins C&W Optus and looks for more Asian deals

SINGAPORE (Reuters): Singapore Telecommunications, fresh from winning the battle for Australia's Cable & Wireless Optus for up to A$17.2 billion (US$$8.4 billion), said on Monday it had an appetite for more regional acquisitions.

SingTel's victory in the long and arduous battle for Optus was sealed on Sunday when rival Vodafone Plc withdrew its conditional offer, saying the proposed transaction did not meet its return criteria.

The purchase of Austrlia's number two telephone company -- the largest foreign acquisition by a Singapore firm -- would not deplete the coffers of cash-rich SingTel or stop it from pursuing other regional assets, chairman Koh Boon Hwee said.

"SingTel will still have significant capacity for expansion in the region," Koh told a news conference. "We are definitely not going to stop if the opportunities present themselves."

Koh said the slump in SingTel's share price, a reaction to the prospect of the Optus deal resulting in a massive share overhang, also did not deter the company.

"The offer we have made for Optus...is a fair one. As far as the stockmarket is concerned, we don't deal with it on a day to day basis," he said.

Shares of SingTel, Asia's eighth-largest telecom player by market value, fell by as much as 12 percent on Monday to a low of S$2.13 in heavy volume of more than 91.7 million shares. The stock was last seen at these levels in June 1998.

Optus ended lower at A$3.80, down 19 cents.

SingTel -- with net cash of US$3.3 billion at the end of March 2000 -- plans to fund its Optus bid through a combination of cash, bonds and an issue of up to 3.1 billion new shares.

Optus shareholders could opt for all shares, cash and shares, or cash, shares and bonds as payment.

Koh reiterated the group's ambition to be a leading Asian player but declined to specify which countries it was looking at.

SingTel officials have expressed confidence in buying more Asian telecoms firms as European carriers like British Telecom, Deutsche Telekom and KPN are pressed to sell regional assets to repair their balance sheets.

The Australian Communications Minister Richard Alston said there were no impediments under federal telecommunications law to the bid by SingTel.

Chief executive officer Lee Hsien Yang said the fall in SingTel shares would not affect the Optus deal as Britain's Cable & Wireless had already agreed to sell it a 19.9 percent stake in Optus. C&W holds 52.5 percent of Optus.

In addition, SingTel was comfortable with an equity price range of A$14.9 billion to A$16.0 billion for Optus.

"The share price is a relative share price exchange...with some cash in it," Lee said.

"To the extent there is some volatility in the market, the offer will automatically adjust in value...inevitably there will be all kinds of noise in the market."

Lee also said the group will hedge its currency requirements for the multi-billion dollar transaction.

"Obviously we would not want to comment on exactly when we might or might not enter into any hedging positions," he said. "We have a relatively long length of time to make sure our forex positions are covered."

The Singapore dollar, which had been under pressure from the Optus deal, recovered from 1.7945 -- its lowest level since August 1998 -- to around 1.7900 to the U.S. dollar on news SingTel would fund part of the deal by issuing U.S. dollar denominated bonds.

The Australian dollar, which traded up to US$0.5023 before the announcement, then fell to a record low of US$0.4888.

"It appears any initially positive Australian dollar implications will be offset by negative sterling and U.S. dollar flows...due to a larger proportion of UK and U.S. owners swapping their Australian dollar payments," Westpac currency strategist Adam Myers said in Sydney.

While Australian and Singaporean investors were less than enthused by the deal, SingTel management saw long-term benefits.

The Optus purchase will be earnings dilutive in the short term, mainly due to the annual goodwill write-off of S$400 million to S$500 million for the next 20 years.

Lee said the acquisition should turn earnings accretive in four to five years and that SingTel's growth rate would be significantly enhanced by Optus.