The government will give up its so-called special golden share, which gives it the right to veto major decisions of the company, and reduce its stake significantly in the "medium term," said Deputy Prime Minister Lee Hsien Loong in Parliament today. He didn't give details such as a specific timeframe.
The government's 78 percent ownership of SingTel has been blamed for scuttling attempts by the biggest phone company in Southeast Asia to make large acquisitions in the region. The move will likely help SingTel in its bid to buy Cable & Wireless Optus Ltd, Australia's second-biggest phone company, analysts said.
"It's helpful for this company to be seen as having strong and independent management," said Patrick Tan, managing director at DBS Asset Management Ltd, who helps manage S$4.3 billion (US$2.4 billion) in Asia.
SingTel failed in an attempt a year ago to buy Cable & Wireless HKT Ltd. HKT's UK parent, Cable & Wireless, rejected the SingTel bid and sold Hong Kong's dominant phone company to Pacific Century CyberWorks Ltd, an Internet start-up run by Richard Li, son of Hong Kong billionaire Li Ka-shing.
SingTel also failed last year to buy part of Time Engineering Bhd, which manages Malaysia's biggest fiber-optics network.
Options
The government could cut its stake in SingTel through a private sale to institutional investors, giving shares to citizens or through dilution from a merger, said Lee.
With a large government stake in SingTel, Optus "shareholders would be worried decisions would be made not for purely business sense, but using a political rationale," said Bertrand Bidaud, director of Asia Pacific telecommunications research at Gartner Group Advisory Ltd in Singapore.
SingTel's bid for Optus is part of its plans to create an Asia-wide mobile phone network. The company has about six million cell phone customers though its investments in Thailand and the Philippines. Optus would add another 3.4 million.
SingTel has stakes in Advanced Info Service Pcl, Thailand's biggest cell phone company, Globe Telecom Inc, the No. 2 mobile phone operator in the Philippines, and Bharti Group, one of India's biggest private phone companies. SingTel also holds a stake in New Century InfoComm of Taiwan, one of four traditional phone companies in Taiwan.
SingTel's shares, down 10 percent this year, fell S$0.04, or 1.6 percent, to S$2.42.
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