SingTel considers sale of Australia's Optus

Singapore Telecommunications Ltd. said Monday, March 18, it has hired bankers to review options for Australian satellite television and communications unit Optus Satellite, which could be worth as much as A$2 billion ($2.1 billion).

Singapore Telecommunications, known as SingTel, said it appointed Credit Suisse and Morgan Stanley to conduct a strategic review "to optimize value for shareholders."

Optus has five satellites, with another due for launch this year, and is Australia's only satellite owner/operator. It made A$319 million in revenue for the year ended March 2012 supplying satellite feeds to Australian and New Zealand television companies, the Australian military and about two million Australian homes.

Its sale is likely to attract interest from pension funds looking for steady returns, as well as telecommunications companies. Canada's Ontario Teachers' Pension Plan said last month that it was in talks to pay A$885 million for 70% of the Australian telecommunications unit of building company Leighton Holdings Ltd.

The profit margin on the satellite operation is likely to be as high as 80% of revenue and a buyer may have to pay as much as seven or eight times Ebitda for the company, according to analysts. SingTel is owned by Singapore sovereign investment fund Temasek Holdings Pte Ltd.

Also on Monday, M2 Telecommunications Ltd., a listed provider of Internet and mobile communications, said it will acquire two rivals for cash and shares in deals worth A$248 million ($257 million), including A$6 million of debt. The Melbourne-based company will pay A$204 million in cash and stock for closely held Dodo Australia Holdings Pty Ltd. and A$44.1 million in shares for listed rival Eftel Ltd.

M2 is paying almost five times the companies' combined Ebitda of A$50 million. Larry Kestelman and Michael Sepoy founded and own Dodo. The two men are also the largest shareholders in Eftel and could end up with just under 10% of M2 depending on the balance of shares and cash they opt to receive.

"M2 will fund the acquisition and refinance existing debt through a combination of new fully underwritten three year, A$400 million loan facilities and the issue of approximately 10.2 million ordinary shares," the buyer said.

M2 tapped Goldman Sachs Group Inc. for financial advice on the acquisitions. It took legal counsel from Minter Ellison.

Shares in M2 closed Monday at A$4.85, up A$0.21, or 4.5% on their Friday closing price. The company has a market capitalization of A$766 million.