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.