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Singapore Telecommunications Limited Wants To Make Some Huge Investments

Singapore Telecommunications Limited (SGX: Z74), Singapore’s largest public company and main telecommunications services provider, proposed two major investments earlier today.

This announcement comes after rumours had surfaced yesterday regarding a possible deal taking place between Singtel and its main shareholder, Temasek Holdings, one of the Singapore government’s investment arms.

In today’s announcement, Singtel revealed that it has entered into a conditional share purchase agreement with Temasek in which the telco will buy a 21% stake in Intouch Holdings Public Company and a 7.39% stake in Bharti Telecom Limited from Temasek.

Intouch Holdings is the largest shareholder and a holding company of Thailand’s main telco, Advanced Info Services Public Company Limited (AIS). Bharti Telecom is a holding company for Bharti Airtel Limited, the largest telco in India. Bharti Airtel also has telco-related investments in other countries, particularly in the South Asia and Africa regions.

At the moment, Singtel already has a 23% stake in AIS and a 33% stake in Bharti Airtel. The deal with Temasek, if it goes through, would push Singtel’s effective interests in AIS and Bharti Airtel to around 31.5% and 36.3%, respectively.

The two purchases are expected to cost Singtel S$2.47 billion in total, with payment in cash. Singtel expects to fund the bulk of the deal through a private placement of 386 million new shares of itself to Temasek at a price of S$4.16 per share, thereby raising S$1.61 billion. The remaining S$865 million or so would be funded by Singtel’s internal cash and other borrowings.

For perspective, Singtel currently has S$966 million in cash and equivalents and S$9.23 billion in total borrowings.

Although Singtel is placing out more shares of itself to fund the investments, the company’s number-crunching reveals that the deal would be accretive to the company’s earnings per share as well as its net tangible asset value. From Singtel’s announcement:

  • Assuming the private placement and investments had been completed on 1 April 2015, the company’s earnings per share for its fiscal year ended 31 March 2016 (FY2016) would have increased by 0.4% from S$0.243 to S$0.244.
  • Assuming the private placement and investments were completed on 31 March 2016, its net tangible assets per share would have climbed by 10.6% from S$0.763 to S$0.844.

Moreover, the investments would allow Singtel to tap further into the higher growth opportunities available in Thailand and India’s telecommunications industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.