Here’s what the potential sale of Keppel T&T’s M1 stake means for the telco landscape

Is a fourth telco really coming?

Reports of Keppel T&T’s potential sale of its 19.2% stake in M1 have risen, and analysts say the sale may give a clearer picture of Singapore’s telecommunications landscape, especially as talks of a fourth telecommunications operator have been going on for a while now.

According to analysts from UOB Kay Hian, the sale may be a sign that a fourth mobile operator is not forthcoming.

“Potential buyers need to exercise due diligence on whether Singapore would have a 4th mobile operator. They need assurance that the competitive landscape would not change and the current cosy oligopoly industry structure would be preserved,” UOB Kay Hian said.

UOB Kay Hian added that the potential buyers of the M1 stake are likely to be trade buyers, including Axiata Group, SPH, government-linked companies, or other foreign telcos.

Meanwhile, UOB Kay Hian also foresees two possible scenarios that could trigger a general offer for M1. The first scenario is the possibility that Axiata Group could acquire more M1 shares from either Keppel T&T or SPH, thus triggering a general offer.

“Axiata Group is able to finance the acquisition due to a strong cash balance of RM4.4b as of Sep 15, which serves as a war chest. In addition, 66.5%- owned subsidiary XL Axiata plans to sell 2,000-2,500 towers through an open tender to raise up to US$500m. XL Axiata is likely to utilise the proceeds from sale to repay a loan of US$500m from Axiata Group, further boosting Axiata Group’s cash holdings,” UOB Kay Hian said.

On the other hand, UOB Kay Hian said another foreign telco or a government-linked company (GLC) could also acquire the two blocks of M1 shares from Keppel T&T and SPH, thus creating a tussle for control of M1.