Singapore’s SingTel is reportedly mulling a sale of a minority stake its wholly-owned Australian subsidiary, Optus, via an IPO that could raise as much as US$5 billion. According to a Wall Street Journal report last week that cites two people familiar with the situation, the IPO plans are at an early stage and it is unlikely to happen until after 2010. One of the sources said SingTel could use the proceeds to expand into Vietnam, China or Africa. “There’s not too much money to be made in Australia; it’s a mature market and competition is very intense,” the person said. “Right now SingTel is thinking of selling a minority stake, but this can change depending on market conditions.” The report suggests that SingTel could use the funds to buy stakes in assets it has looked at acquiring in the past, including Vietnam’s MobiFone and Ghana Telecom.
SingTel took control of Optus in 2001 in a deal that valued Australia’s number two operator at US$15 billion. However, despite being a profitable business, the Wall Street Journal says that some analysts have recently voiced concerns about the unit’s margins. The operator’s EBITDA margin fell to 23 percent in SingTel’s fiscal first quarter (ended 30 June) compared with 25.3 percent in the same quarter a year earlier and 27.8 percent in the previous quarter. Analysts also fear that margins could be further pressured by the recent merger between Vodafone and Hutchison in Australia, which has created a powerful number three player in Australia’s mobile market to challenge Optus and market-leader Telstra.
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