Singtel to buy majority stake in Intouch

Singtel to buy majority stake in Intouch

A man walks through a door with an Advanced Info Service advertisement at AIS Tower I building on Phahon Yothin Road in Bangkok on Aug 10, 2016. Singtel will buy from Temasek a 21% stake in Intouch Holdings, which owns 40.45% in Thailand's largest mobile service provider, the company announced on Thursday. (Photo by Patipat Janthong)
A man walks through a door with an Advanced Info Service advertisement at AIS Tower I building on Phahon Yothin Road in Bangkok on Aug 10, 2016. Singtel will buy from Temasek a 21% stake in Intouch Holdings, which owns 40.45% in Thailand's largest mobile service provider, the company announced on Thursday. (Photo by Patipat Janthong)

SINGAPORE - Singapore Telecommunications Ltd agreed to pay S$2.47 billion ($1.8 billion) for stakes in Intouch Holdings Plc and India’s Bharti Telecom Ltd to broaden access to fast-growing wireless markets in Asia and Africa.

Singtel will pay 60.83 baht per share for a 21% holding in Intouch and 235.62 rupees a share for 7.39% of Bharti Telecom in cash to Temasek Holdings Pte, Singapore’s state-owned investment firm, the carrier said in a statement Thursday.

As Intouch has 3.21 billion paid-up shares in total, the Thai deal is estimated at 40.96 billion baht.

The transaction will be funded through short-term debt and a S$1.605-billion placement of shares to Temasek, according to the announcement.

Intouch CEO Philip Tan confirmed the agreement in a statement filed to the Stock Exchange of Thailand (SET) at the end of the morning trade on the same day. Intouch shares (INTUCH) closed down 0.40% to 61.75 baht in trade worth 1.4 billion baht on Thursday.

The deal deepens Singtel’s footholds in Thailand and India, where the shift in users to smartphones is driving up demand for data services. Intouch is the biggest shareholder in Advanced Info Service Plc, Thailand’s largest wireless carrier, while Bharti is the largest stake owner of Bharti Airtel Ltd, India’s No. 1 mobile phone operator.

“The deal makes sense,” Nicholas Teo, a strategist at KGI Fraser Securities said by phone. “Their growing footprint in Asia makes them an attractive regional mobile player. This brings economies of scale that allows them to offer better pricing for customers roaming around the region.”

The transaction won’t result in a big shift in control of the market because Singtel is buying the stakes from its majority owner, Temasek, while raising the money to pay for it mostly from the owner. The placement of new shares with Temasek will raise its stake in Singtel to about 52.27% from about 51%.

AIS and Bharti Airtel, the wireless affiliate, have operations in 18 countries across South Asia and Africa and a combined customer base of 380 million, Singtel said in the statement. The Singaporean carrier began investing in those businesses in 1999, it said.

“We have confidence in the long-term performance of India and Thailand,” Chua Sock Koong, Singtel chief executive officer, said at a media briefing in Singapore.

Thaksin legacy

The Intouch acquisition had been previously discussed in 2014, when political instability in Thailand ultimately doomed a deal.

Intouch changed its name from Shin Corp in 2011 as the group sought to distance itself from the family of founder and former Thai Prime Minister Thaksin Shinawatra, who was ousted in a 2006 military coup. Thaksin’s sister Yingluck Shinawatra, the prime minister when her government was toppled in a coup in 2014, was once president of the mobile-phone unit.

A Temasek-led group bought 49.6% of Shin in 2006 from then-premier Thaksin and later raised its stake to more than 96 percent, sparking protests and a boycott of Shin products in Thailand. Thaksin’s opponents at the time accused him of selling state assets to a foreign government and avoiding paying tax on the windfall.

“Intouch is well within its foreign shareholding limit, so it is a case of a foreign investor selling foreign shares to another foreign investor,” Chua told reporters Thursday. Regulatory approvals will be “fairly routine," she said.

The deal announced Thursday, subject to shareholder and regulatory approvals, is expected to be completed by December, according to the statement.

The agreement offers about 1.9% less than Wednesday’s closing price for Intouch shares. Bharti Telecom is closely held. The share placement to Temasek is set at about 1.2% below Wednesday’s closing price.

“We rebalance our portfolio from time to time,” Ravi Lambah, head of telecommunications, media and technology for Temasek, said Thursday in a statement on the company’s website. “We are pleased to have the opportunity to further invest in Singtel.”

Singtel shares have risen 15% this year as of Wednesday’s close, compared with the 1.4% drop in the Singapore benchmark Straits Times Index.

The five largest shareholders of Intouch as of the latest sharholders' book closing date on March 3, 2016 are: Temasek subsidiary Aspen Holdings Co Ltd (40.5%), non-voting depository receipt holders (17.59%), Littledown Nominees Ltd (3.37%), a long-term equity mutual fund (1.25%) and the Social Security Office (0.96%).

Based on the structure, Singtel will become the largest investor in Intouch if the deal goes through, followed by Temasek, whose stake will be reduced to 19.5%.

Intouch holds shares in four business groups -- wireless telecommunication, satellite and international business, other businesses and venture capital.

It is the majority shareholder of Thailand's largest mobile provider AIS (40.45%), transponder leasing provider Thaicom Plc (41.14%) and internet service provider CS Loxinfo Plc (42.07%).

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