Mulling fibre asset stake sale in Australia?

  • According to Business Times, Optus is considering options including a potential stake sale in the fibre assets
  • According to Business Times, Optus is considering options including a potential stake sale in the fibre assets
  • Even if true, we don’t think these assets will be as much worth as Optus towers; Singtel has S$2bn medium-term divestment target on top of Optus towers. 
  • Maintain BUY on Singtel with unchanged TP of S$3.13. 

According to Business Times, Singtel is considering options including a potential stake sale in the fibre assets of its Australian subsidiary SingTel Optus Pty, people familiar with the matter said, of a deal that would follow last year’s disposal of its mobile phone towers unit.

Singtel refused to comment on market rumours, but we understand that this may be a possibility with Singtel having set another divestment target of S$2bn in the medium term which includes infrastructure assets besides advertising arm – Amobee and North American operations of cybersecurity firm – Trustwave. However, we think that these Optus fibre assets are more of enterprise kind of nature as last-mile consumer fibre belongs to National Broadband Network (NBN) of Australia. These assets may have limited reach in central business districts of few cities and hence unlikely to be of similar worth as Optus towers. 

We like Singtel for potential recovery in core business especially led by Optus which has seen across the board price-increase last year whose effects will be more visible over the next 6-9 months. Associates’ growth led by Bharti should drive bulk of growth at Singtel. Nevertheless, core-business recovery is the most critical factor the share price. Maintain BUY with unchanged TP of S$3.13.