Singtel Shares Surge 7.5% on Potential Merger Between Australia Telco Rivals

Shares of Singapore Telecommunications (Singtel) surged as much as 7.5 per cent on Thursday (Aug 23), the most since May 2009 after Vodafone Hutchison and TPG Telecom said they were in "exploratory" discussions for a potential merger.

A potential marriage between Singtel's two rivals in Australia could bring joy to South-east Asia's largest telco, analysts said, with Singtel facing less competition in Australia, where it generates over half of its revenues.

"If a deal does proceed, we believe it would be positive for Singtel's Australian business, Optus," Citigroup Global Markets Inc's analyst Arthur Pineda wrote in a note.

A deal would also have implications for Singtel's domestic market of Singapore as a TPG Telecom unit won the bid to become the city-state's fourth mobile phone operator.

"We believe the implications for the Singapore mobile market are less clear-cut as there are no indications that TPG Telecom's aspirations are off the table," wrote Ramakrishna Maruvada, an analyst at Daiwa Capital Markets Singapore, in a note. "However, the negotiations itself suggest rational, return-seeking behaviour on the part of TPG, which lowers the odds for an aggressive, disruptive market entry, in our view."

Maruvada upgraded Singtel to outperform from hold following the announcement of the possible merger plans among its Australian rivals.

The Singapore telco itself is said to be examining a possible bid for Amaysim Australia which would give it access to the operator's more than 1.1 million mobile subscribers.

Source: straitstimes