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Doreen Siow
Singapore, Aug 12: Singapore Telecommunications Ltd (SingTel) is exploring a possible alliance with Deutsche Telekom but it was too early to tell how the deal may shape up, telecoms analysts said on Thursday.
Reports in the local newspapers said SingTel and Deutsche were in talks over a possible tie-up for their cellular operations, with speculation the German telecoms giant might also take as much as a 20 per cent stake in SingTel.
"There is something brewing, but it probably not result in an equity stake. It will be hard justify the return on investment for Deutsche or SingTel," Lawrence Lye, analyst at DBS Securities said.
When contacted, a SingTel spokeswoman told Reuters it was not the company's policy to comment on any ongoing discussions the company might have before they were finalised.
But she added that SingTel "Is always looking out for opportunities and is open to alliances."
Deutsche officials in Singapore also declined comment on the newspaper reports.
SingTel, the largest company 7on the Singapore Stock Exchange with a market capitalisation of $42 billion, saw its shares react positively to news of a potential alliance with Deutsche.
The shares rose 5 per cent to a high of $2.92. In active morning trade before closing at $2.85, up nine cents.
Analysts said an alliance with Deutsche was possible but an equity stake in SingTel costing some $8.4 billion was probably not on the cards for now, as the German firm had just paid 8.4 billion pounds for British mobile carrier One2One. "The talk about Deutsche has been around. We heard similar rumours three to four months ago and it was denied and now they have resurfaced again," Pratik Gupta, analyst with Salomon Smith Barney said.
Gupta said he thought it unlikely that Deutsche would seek a stake in SingTel but an alliance for the two firm's cellular operations was possible.
"An alliance would benefit both parties as it would provide cheaper and better access to markets that they both operate in," he said.
Besides the Singapore market, SingTel could offer Deutsche better access in Thailand, where it has Advanced Info Services, and in the Philippines, through Globe Telecom
Deutsche in turn could give SingTel better access in Malaysia, through Technology Resources Industries, in Indonesia through PT Satelindo, and also in Europe, he said.
Lye of DBS Securities also said an alliance between the two for their cellular operations would be positive but it was hard to quantify the gains resulting from such a deal.
"More partners and alliances would be better for SingTel. But I think it would be more interesting if SingTel could form an alliance to help them penetrate the North American market."
Timothy Wong, research Chief at Vickers Ballas, said the news was positive "especially for a stock which has underperformed the market" in the last 12 months.
"But without details, it would be hard to tell how significant the tie-up with Deutsche would be," he said.
Wong said he would not rule out SingTels' controlling shareholder, government-owned Temasek Holdings, wanting to sell a significant stake in the company to another major telecoms firm.
Temasek currently owns 80 percent of SingTel.
"Temasek has made it known that it wants all its companies to be globally positioned and linking up with Deutsche would be in line with the overall trend that the GLCs (government-linked companies) are moving into," he said.
Wong said one way for that to be achieved could possibly be a share swap between the two firms not involving any cash outlay.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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