Optus Satellite Sale Piques Interest
SingTel Optus , Australia's largest alternative telecommunications carrier, has re portedly received multiple bids for its satellite division, which was put u p for sale in May 2013 . P arent Singapore Telecom is soliciting offers in exces s of AUD2bn (US$1.9bn) to help finance a raft of acquisitions and expansion plans that will bring in much-needed new revenue streams. However, as the business op erates key satellite facilitie s for the Australian military services, the deal could be subject to detailed government scrutiny and the imposition of terms and conditions that new owners might find unpalatable.
The Optus fleet consists of five satellites that deliver telephony, internet access, radio, television and telemetry links across Australia, New Zealand and associated territories, including parts of the Antarctic. A sixth satellite is to be launched in 2013. The C1 satellite holds transponders that serve the military services and, with the Australian government and electorate becoming increasingly sensitive about foreign involvement in communications and technology companies, BMI believes the sale could raise concerns.
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Private equity groups Carlyle Group and KKR & Co are two of the bidders named by local media, alongside international satellite businesses Eutelsat and SES . BMI does not believe any of the bidders represents a threat to Australia's national security but, as privately-owned organisations with investments held in a large number of businesses active in a diverse range of industries, Carlyle and KKR may be required to disclose detailed plans for Optus Satellite to the government.
Despite the proliferation of submarine cables offering high bandwidth at lo w rates, Asia is still heavily reliant on satellites to deliver basic services across large rural areas. Both Eutelsat and SES are known to be looking for strategic investment opportunities in the region and favour the acquisition of existing satellite business es over the construction and launch of new fleets. However, Eutelsat has said that it is not looking for 'transformational' deals, sug gesting its investment resources are relatively limited.
SES, meanwhile, reports that Asia is its second fastest-growing region in terms of revenue development. Ho wever, its capital investment bu dget for the 2013-15 period is principally geared towards replacing existing satellites or adding capacity on existing facilities, including terrestrial infrastructure. Some of that budget - EUR140mn in each of 2014 and 2015 and EUR200mn in each of 2016 and 2017 - has been earmarked for potential growth investments and could be refarmed to account f or the acquisition of Optus' satellites. Even so, a US$2bn price-tag for Optus Satellite could be beyond its immediate reach.
SingTel has been reporting disappointing revenue and profit growth from its domestic and overseas operations on the back of increased competition, market saturation and growing operating costs linked to the need to invest in new technology and services. The company has been divesting non-core or unprofitable businesses of late - including Pakistan-based Warid Telecom - but needs approximately US$2bn to bolster those businesses it wishes to keep as well as make selected acquisitions, possibly in complementary areas such as data centres. It will, therefore, be hoping to conclude the sale of Optus Satellite as quickly and as painlessly as possible. But with the Australian government raising concerns about the use of Chinese-made equipment in telecoms networks and with the media tapping into consumers' concerns about government's access to user information, the deal could take time to process.