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Singapore Telecommunications Limited’s $2 Billion Netlink NBN Trust Windfall: What’s Next?

The time has come for Singapore Telecommunications Limited (SGX: Z74) to cash in on its stake in Netlink NBN Trust (SGX: CJLU).

The telco held a 100% stake in Netlink NBN Trust prior to the latter’s initial public offering (IPO). 

As part of an agreement with Singapore’s Info-communication Media Development Authority (IMDA), Singtel was to divest at least 75% of its stake in the trust before 22 April 2018. With the IPO listing last month, Singtel has fulfilled its obligation.

The big bounty

In its latest earnings announcement, Singtel reported:

“In July 2017, NetLink NBN Trust was successfully listed, raising proceeds of S$2.3 billion.

This public offering fulfils Singtel’s undertaking to the Info-communication Media Development Authority to divest its 100% stake in NetLink Trust to less than 25% before 22 April 2018. A net gain of approximately S$2 billion from this divestment will be recorded in the second quarter.”

Singtel indicated that it would receive $2 billion in net proceeds. The Singapore-based telco noted that it plans to retain a 24.99% stake in Netlink NBN Trust after the IPO.

What’s next?

In its official statement, Singtel said:

“We are currently reviewing the usage of the proceeds and will announce any capital management initiatives during our half year results.”

Singtel’s Chief Executive Officer, Chua Sock Koong, gave further insights during the telco’s earnings briefing:

“… we will look at using it for investing in our core, look at new business opportunities, pay down debt and we will also review other capital management initiatives.”

At the end of the fiscal first quarter, Singtel had S$632 million in cash and equivalents and S$11.5 billion in debt. So, the cash will come in handy should Singtel choose to reduce its debt. Chua added: 

“Okay, I think how we are going to use the proceeds everything is under consideration. Everything is under the bucket of capital management initiatives.”

Was Singtel’s head hinting at a possibility of a special dividend? We might have to wait until the second fiscal quarter to see what Singtel has in store.

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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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.