Singtel Stumbles After Reports of Optus Stake Sale Talks

Shares in Singapore Telecommunications (Singtel) Ltd. dropped in early trading on Thursday after the Singaporean telecommunications giant was reportedly in advanced talks to sell a large part of its holdings at its Australian arm, Singtel Optus Pty Ltd., to Canadian private equity firm Brookfield Corp.

Singtel’s stock last traded 0.40% lower after declining 1.6% earlier in the session. The shares posted almost a 4% gain on Wednesday.

A person familiar with the matter said Singapore’s largest carrier was in advanced discussions about a ‘significant’ stake sale to Brookfield. The specific amount of the potential deal has yet to be known.

The news came after Singtel denied reports of its plans to divest its whole Optus stake for A$18 billion ($11.93 billion). The company stated that the Australian telco firm, the country’s second-largest telco, is critical to them, reiterating their long-term commitment to the land down under.

The Singaporean telco group has yet to comment on the stake sale report on Thursday, while Toronto-based Brookfield has declined to comment.

Optus Stake Sale Presents Potential Windfall for Singtel

Singtel may see a windfall with a stake sale in Optus, which it has been invested in for over 20 years.

Serious security issues recently hit its Australian arm, and the proceeds from the deal might help fund significant projects, such as further ventures in the data center market that have strengthened due to the global success of artificial intelligence (AI).

In November 2023, Optus was severely struck by a 12-hour network outage that left more than ten million people in Australia without internet access, disrupting electronic payment systems and medical and police phone lines.

The blackout led to the company’s scrutiny, the resignation of then chief executive Kelly Bayer Rosmarin, and an A$1.5 million ($990,900) fine.

The nationwide outage also followed a major cyberattack in the company in September 2022, where Optus saw the unauthorized disclosure of millions of customers’ personal data.

Optus accounts for a substantial portion of Singtel’s revenue and is one of the firm’s largest overseas investments. In the first half of 2023 ended September 30, the operator represented around 50% of the firm’s consolidated revenue and earnings.

While a prospective sale could curb the telco’s scale and diversity, analyst Sharon Chen said Singtel might be able to keep present ratings if part of the capital is used to deleverage.

According to Chen, a partial stake sale could help the company, as it would provide some backing to investments while supporting the group’s solid leverage.

Singtel sold last week a 0.8% stake in Indian telco Bharti Airtel Ltd. for S$950 million ($709 million) to US investment firm GQG Partners to continue financing its data center and IT services and trim net debt.

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