SingTel " is looking for a quick and clean outcome," the person said, noting that the offer is pitched at a premium of about 20% above the A$3.80 per share that Optus is currently trading on the Australian Stock Exchange.
For SingTel, an early win is important. The company needs to expand outside Singapore' s relatively small market, where competition is increasing in the city-state' s liberalized telecommunications market. Its move on Optus marks SingTel' s third attempt over the past year or so to make a big acquisition in the Asian-Pacific region. SingTel lost an opportunity to acquire Cable & Wireless PLC' s Hong Kong arm last year when the British company opted to sell to Hong Kong-based Pacific Century CyberWorks Ltd. Subsequently, a deal to acquire Time Engineering Bhd., a Malaysian telecommunications concern, fell through.
Optus, which is 52.5% owned by Cable & Wireless, has been put on the auction block following a decision by the British company to focus on its global strategy of data and business services. Optus is a full-service telecommunications company that provides a range of services including mobile telephony, pay television, Internet access and data and business services. So far, two other companies, London-based telecommunications company Vodafone Group PLC and Telecom Corp. of New Zealand , have shown the most interest in acquiring Optus.
Few details were available on SingTel' s offer, which followed a two-day board meeting of the company in Singapore late last week and appears aimed at knocking its rivals out of the running. A SingTel spokesman in Singapore declined to comment on Sunday. But the person close to the transaction said the offer is above A$4.60 a share and the share component means the Singapore government' s 78% stake in SingTel will be trimmed. Optus shareholders will receive mostly cash, but could end up with a holding of about 20% to 30% in SingTel, the person said. An Optus spokesman declined to comment on the offer other than to say that the company is still in talks with all three interested parties. On Sunday night, a spokesman for Telecom Corp. said the company remains interested in bidding for Optus. A Vodafone spokeswoman in Sydney said " we' re focused on our bid" and the company still is in discussions with Optus and Australia' s antitrust regulators, who are reviewing Vodafone' s preliminary offer for Optus.
Last month, Vodafone unveiled a proposal to acquire Optus for as much as A$20 billion. However, Vodafone already has about 19% of Australia' s mobile-telephone market, and acquiring Optus would give it about 53%. As part of its proposal, Vodafone has offered to enter into an alliance with the Australian arm of Hutchison Whampoa Ltd. to transfer about one million of Optus' s 3.4 million mobile-phone subscribers to Hutchison, a latecomer that currently holds less than 1% of Australia' s mobile market. That would leave Vodafone with around 43% of the market, while Hutchison would have 10%, Vodafone has said.
The regulators, though, have said they need until at least the end of this month to review Vodafone' s proposal. And there are some hints that Cable & Wireless may be willing to wait on the regulator' s decision before choosing a winner for Optus. Previously, Cable & Wireless has said it wanted Optus' s fate sorted out by the end of this month. But last week, Graham Wallace, chief executive of Cable & Wireless, told a New York conference that " we' re now in the middle of restructuring Optus' and " we' ll complete that later in the year."
Some market watchers think Cable & Wireless may favor Vodafone because Vodafone' s primary interest is Optus' s mobile-telephone business. Vodafone is bidding " for the whole company," but plans to divest the other operations, Vodafone' s spokeswoman said. Cable & Wireless would like to reacquire them because they are part of the company' s global strategy. SingTel, for its part, wants to keep those services because they fit with the Singapore carrier' s pan-Asian aspirations.
While SingTel' s offer is well within the range of some Australian analysts' estimates of what Optus is worth, some analysts in Singapore expressed surprise at the price SingTel is willing to pay.
Ali Naqvi, head of research at Credit Suisse First Boston in Singapore, said SingTel shares could come under pressure as analysts expected the offer price to be closer to A$4 a share. " This is a huge premium for a company that you know is in the market for a buyer, that does not offer strong growth prospects," he said.
Mr. Naqvi added that a share swap also doesn' t make sense for Cable & Wireless. " Why would they [Cable & Wireless] want to swap shares from one Asian country to other?" he said.
Marc Tan, senior fund manager at Optimix Funds Management, also said the price is expensive. " The point is that the Australian market is very well entrenched ... I am not sure if its really worth the price they are paying."
Besides holding roughly a third of the mobile-telephone market, Optus has more than 300,000 subscribers to its dial-up Internet service. Optus doesn' t break out sales of certain other services but the company says that about 450,000 people now subscribe to a basket of services that includes fixed-line telephony, high-speed Internet access via broadband cable, and pay television.
SingTel shares closed in Singapore trading Friday at 2.65 Singapore dollars (US$1.51) each. The stock has dropped nearly 10% since SingTel in February disclosed its interest in Optus.
Write to S. Karene Witcher at [email protected] , Ian Pemberton at