Singtel plays down reports on AIS stake

Alan Burkitt-Gray
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Singapore Telecoms fails to confirm or deny talks with Temasek about increasing stake in Thai operator as Fitch warns about credit rating

The Singapore government’s investment group, Temasek, is talking about selling part of its indirect stake in Thailand’s Advanced Info Service (AIS) to Singtel, in which Temasek also owns a stake.

Singtel has responded by playing down the reports, though it has not denied them. The company said in a statement today: “Singtel regularly explores and reviews business opportunities, projects and proposals relating to its business and enters into discussions with various parties from time to time.”

Fitch Ratings warned that any such may affect Singel’s A+ credit rating. “Such an acquisition, if debt-funded, would further weaken Singtel's net leverage, and may threaten its ratings, as ratings headroom is already low,” said the credit rating agency this morning.

Temasek owns 51% of Singtel, whose shares are quoted on the Singapore Stock Exchange. Singtel also owns 23% of a Thai company, Intouch, which controls AIS, and Temasek owns another 41% of Intouch. It is Temasek’s shareholding in Intouch that could be partly sold to Singtel, according to reports.

Bloomberg points out that similar discussions took place two years ago, but they were called off because of political instability in Thailand. However Thailand appears to be more stable now, and the discussions have revived, says the agency.

Fitch Ratings focused entirely on the financial impact of any deal rather than on the political questions. However, it pointed out: “Thailand currently caps foreign ownership of local facilities-based telecommunication operators to less than 50%. However, this should not restrict any Intouch deal as Temasek’s indirect stake of 16.4% and Singtel’s 23.3% in AIS would be well within the foreign ownership limit.”

Fitch pointed out that Singtel’s borrowings are already near a level “above which we may consider negative rating action”, and warned that if Singtel were to acquire Temasek’s entire interest in Intouch and fund it through additional debt, the company’s borrowings would increase substantially.

Singtel stated, again without confirming or denying any discussions with Temasek: “When such discussions occur, there is no certainty that any transaction will arise from these discussions or that any definitive or binding agreement will be entered into pursuant to these discussions, and Singtel confirms that there is no definitive or binding agreement.”