Even as it enters into a $2.47 billion deal with Temasek Holdings to crank up its exposure to Thailand and India, Singtel has assured shareholders that its dividend policy will remain unchanged.
"The dividend payout ratio will remain between 60 and 75 per cent of underlying net profit," said group chief executive Chua Sock Koong at a press briefing yesterday.
Singtel has unveiled plans to buy about half of Temasek's 41 per cent stake in Thai telecommunications firm Intouch for $1.585 billion, and pay $884 million for Temasek's entire stake in Bharti Telecom, jointly owned by Temasek, Singtel and India's telco tycoon Sunil Mittal.
Singtel will fund the purchase through a $1.6 billion placement of new Singtel shares to Temasek, as well as internal cash and short-term debt.
Nomura analysts said that Thailand and India's market demographics are favourable for growth, but also warned that they are prone to volatility.
"It may not be easy to figure out how the market structure and economics will pan out in the next 10 years," they wrote in a note.
But Ms Chua said that the deal, which raises Singtel's interests in Thailand's Advanced Info Service and India's Bharti Airtel to 31.8 per cent and 36.2 per cent respectively, gives Singtel more access to two "high-performing" associates that Singtel has worked with closely for more than 15 years. Singtel will also get a seat on the Intouch board.
Singtel's more recent acquisitions may have been focused on new businesses like cyber security (Trustwave) and digital marketing (Amobee), but "our stated policy has always been to increase stakes in our associates when presented with the right opportunities", Ms Chua added.
The deal also allows Singtel to optimise its capital structure, she said. Singtel's equity base will increase after the placement, helping its net debt-to-equity ratio.
BNP Paribas analyst Wei Shi Wu called the deal "reasonable", since Temasek is offering its stake in privately held Bharti Telecom at a 10 per cent discount to the average trading price of Bharti Airtel over the last 20 days. Bharti Telecom has a 45.1 per cent stake in Airtel.
In a separate statement, Temasek said that the plan to offload half its stake in Thai telco holding company Intouch and its entire stake in India's Bharti Telecom is part of routine portfolio rebalancing.
A Temasek spokesman pointed out that Temasek's exposure to the telecommunications, media and technology sector was in fact the largest in its portfolio, at 25 per cent, as at March 31.
"We remain heavily invested in Asia," he added.