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SingTel’s Optus Inks Virgin Deal

SingTelLogoOptus announced today that it had signed a five-year, A$60m deal with Australian airline Virgin Australia to “deliver domestic and international telecommunication services as well as managed services.”

Optus is a wholly-owned subsidiary of Singapore’s biggest telecommunication services provider SingTel (SGX: Z74) and operates primarily in Australia. It is also responsible for more than half of SingTel’s revenues.

Managing director of Optus Business, John Paitaridis, hailed the new deal as a “further proof point” of the company’s recent restructuring efforts in integrating all its resources into one organisation.

Virgin chose Optus “based on a wide range of criteria including partnering approach and regional delivery capability.”

Telstra is the largest telecommunications company in Australia with Optus a distant second. The former has a similar deal with Qantas, supporting the Australian flag carrier with telecommunication services since 2004. Whilst I’m not privy on how the Virgin contract’s bidding process went, it would not really be a surprise if Telstra had also bid for it.

SingTel’s corporate performance in Singapore, which has been waning since 2004, might be due to competition from peers StarHub (SGX: CC3) and M1 Limited (SGX: B2F). Now, more than ever, Singapore’s telco giant is heavily dependent on its foreign subsidiaries and associates in helping to boost its numbers. Consequently, investors should keep a close eye on their progress overseas.

While the monetary figures involved in the deal announced today are tiny compared to SingTel’s annual revenues, it is still one step in the right direction for both SingTel’s investors and its Australian subsidiary, Optus.

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