Singapore investment firm Temasek Holdings has agreed to sell Singtel a 21 per cent stake in Intouch Holdings, the Thai telecoms conglomerate formerly known as Shin Corp.
Temasek will also sell its entire 7.4 per cent stake in India's Bharti Telecom to Singtel.
As part of the deal announced yesterday, Singtel, which is 51 per cent owned by Temasek, said it would fund the $2.47 billion cash purchase partly with short-term debt and by placing out new shares to Temasek at $4.16 apiece to raise $1.6 billion.
"Thailand and India are fundamentally attractive markets which are reaping the benefits of rapidly increasing smartphone penetration," Singtel's group chief executive officer Chua Sock Koong said at a briefing yesterday.
If the deal goes through, Singtel will emerge with an effective 31.8 per cent stake in Thailand's No. 1 wireless carrier, Advanced Info Service (AIS), which is 40.5 per cent owned by Intouch. Singtel currently has a 23.3 per cent stake in AIS and none in Intouch. The deal will also raise Singtel's stake in India's No. 1 mobile telco Bharti Airtel, a unit of Bharti Telecom, to 36.2 per cent from 33 per cent currently.
While Singtel is raising its stakes in both its India and Thai units, it is the Intouch deal that is receiving more attention because of its controversial roots. In 2006, a Temasek-led group bought 49.6 per cent of Shin Corp from the family of then Thai Premier Thaksin Shinawatra. The stake was eventually raised to more than 96 per cent. That sale sparked protests and accusations that Thaksin was selling off strategic assets while evading taxes. He was later ousted in a military coup.
Stake in Intouch Holdings that Temasek Holdings has agreed to sell to Singtel
Stake in India's Bharti Telecom that Temasek Holdings is selling to Singtel
Temasek is selling its Intouch shares for $1.585 billion or 60.83 baht apiece, after buying them at 49.25 baht a share.
Nomura analyst Gopa Kumar noted that Singtel's share purchase avoids crossing Thailand's 25 per cent threshold that would trigger a general offer for the shares of Intouch which the firm does not own.
But even so, the political temperature has cooled since then. Deutsche Tisco Investment Advisory analyst Thapana Phanichsaid: "I don't see much scope for a backlash. Technically, (Singtel and Temasek) are just swopping ownership."
Besides, Singtel, being a listed company, is viewed with less suspicion than would fall upon a sovereign wealth fund, he added.
Ms Chua also pointed out that Singtel's stakes in AIS and Intouch still remain well below the 50 per cent foreign share limit imposed on Thai companies.
The three transactions are subject to approvals by both Singtel's minority shareholders and regulators, and must be completed as a "package deal", Singtel said. The overall deal is expected to be completed by December.
Singtel shares closed a cent down at $4.20 yesterday.