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SPH And Keppel Arm Considering Buyout Of S$1.51B Telco M1 To Gain Majority Control

Singapore Press Holdings and a subsidiary of Keppel Corp – Keppel Telecommunications & Transportation – are considering making a buyout offer for telco M1, which has a market value of S$1.51 billion.

The two companies currently control almost 33 per cent of M1, with SPH holding nearly 13.5 per cent and Keppel T&T owning about 19.3 per cent.

They have recently made a pre-conditional voluntary general offer of $2.06 per share for the remaining shares in M1 that they do not own.

This offer is a strategic initiative to gain majority control of M1 in order to drive business changes that will enable the telco to better compete in in the industry, said SPH in a statement.

They have also since approached M1’s biggest shareholder, Malaysian telecommunications firm Axiata Group, which holds a 28.7 per cent stake, about the potential transaction.

A deal for M1 could be announced in the next few days.

Through the deal, SPH has undertaken to roll-over its existing stake in M1 into Konnectivity and eyes to invest up to $51.3 million to partially fund the offer.

SPH’s effective stake in M1 may increase up to 2.68 ppt to 16.13% upon the close of the offer.

However, Axiata may decide to make its own offer for M1 if the price announced by SPH and Keppel is too low.

“Axiata is consistent in our publicly stated position that we will consider all viable and appropriate options that will enhance our own shareholders’ value,” the Malaysian carrier said in a statement, declining to comment further.

M1’s Revenue Is Falling — Is This A Good Choice?

M1’s market value has dropped 59 percent to S$1.51 billion since its 2015 high, while revenue is expected to fall about 1.5 percent this year, according to analysts.

As Singapore’s smallest wireless operator, M1 has had to cut prices, dragging revenue per user lower ever year since 2010.

But despite this revenue slide, M1 has still maintained a relatively stable profit because of its capital efficiency, and this will definitely be attractive to both Keppel and SPH.

This potential buyout will put SPH and Keppel in control of the carrier. But with TPG Telecom Ltd’s entrance to the market this year, it will pressurise them to lower prices even further and raise revenue by offering additional services such as TV and movies on-demand.

Featured Image Credit: Bloomberg

 

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