Singapore fibre broadband provider MyRepublic, which lost out to TPG Telecom in the race to secure the country’s fourth mobile licence in December 2016, is reportedly seeking a private-equity partner to launch a bid for local mobile operator M1. According to people with knowledge of the situation, MyRepublic has canvassed several buyout firms concerning a move for M1 as it seeks to secure financing to table the bid. Although the sources have asked not to be identified due to the confidential nature of the plan, the internet provider’s billionaire backer Xavier Niel is understood to be keen on a deal. That being said, local press note it is remaining tight-lipped at this stage: ‘As M1 is a publicly listed company, MyRepublic is unable to provide a comment at this point,’ said a MyRepublic spokesman via email.
The sources also said that Warburg Pincus had earlier expressed interest in investing in M1, but subsequently decided not to pursue a deal, while Shanxi Meijin Energy Co and China Broadband Capital also submitted first-round offers for Singapore’s third largest carrier by subscribers – according to reports last month, again citing unnamed sources with knowledge of the matter.
The stumbling block to any final agreement will be the asking price set by M1’s main shareholders. As reported by CommsUpdate, in March this year Singapore Press Holdings (SPH), Keppel Telecommunications and Transportation and Axiata Group, which between them collectively control a roughly 60% stake in M1, confirmed they were considering options to sell their respective stakes, although each declined to give a reason for the move. The shareholders issued separate statements confirming they are undertaking a strategic review of their respective shareholdings in M1. A media release by SPH noted: ’The company, Keppel Telecommunications and Transportation and Axiata Group are currently undertaking a strategic review in respect of their respective shareholdings in M1 which may or may not lead to a transaction.’ Morgan Stanley Asia (Singapore) has been appointed as financial adviser to assist with the strategic review.
The Singapore telco is estimated to be worth SGD2.05 billion (USD1.5 billion), valuing the primary stakeholders’ shares – Axiata (~28%), Keppel (~19%) and SPH (~13%) – at more than SGD1.20 billion, which could prove the key issue in any eventual deal. Singapore’s smallest telecoms operator by subscribers and revenue has struggled of late. M1 reported a 14.6% year-on-year fall in net income for January-March 2017 to SGD36.3 million, in part the result of higher depreciation and interest expenses, but noted that when compared to the preceding quarter, net profits were up 14.3%. The operator said first-quarter operating revenue increased 1.2% y-o-y to SGD260.7 million, while service revenue remained stable at SGD201.5 million, as growth in fixed services revenue offset lower IDD and roaming revenues. Sales derived from fixed services increased 22.8% on an annualised basis to SGD30.0 million and accounted for 14.9% of overall service revenue, driven by increased residential and corporate sign-ups; M1 ended the quarter with an 8,000 quarter-on-quarter increase in fibre broadband customers to 168,000. Moreover, M1 also added a net 24,000 post-paid mobile customers and 3,000 pre-paid customers to lift its overall mobile total to 2.05 million at 31 March 2017.