SingTel owns rival Internet service provider (ISP) SingNet, but analysts said the authorities are unlikely to prevent a merger on the ground of restricted competition, as there are several ISPs on the island.
Both SembCorp and SingTel are said to be in "advanced stages of negotiations over the deal, and the island's No 1 telco has begun due diligence on PacNet, The Straits Times reported Saturday, citing unnamed sources.
SembCorp and SingTel were tight-lipped about the possible deal. When contacted by Singapore.CNET.com, PacNet CEO Tan Tong Hai said: "We have not been notified by SembCorp of any shareholder change."
Info-communications Development Authority of Singapore (IDA) spokesman Dulcie Chan said that "IDA will evaluate any application for a change in shareholding in accordance with the provisions and procedures in the Telecom Industry Code to ensure that the change does not unreasonably restrict competition."
PacNet has upwards of 380,000 subscribers, and cash of about S$18 million, and is in the process of restructuring after racking up S$22.4 million in losses last year. It was started in 1995, and was Asia's first online company to be listed on Nasdaq in 1999. Its shares hit US$94 before sinking. It closed at US$4.50 on Friday. At that price, SembCorp's stake would be worth US$24.2 million.
Assuming the deal goes through, SingTel would have to make a general offer for PacNet, which provides Internet service in several Pacific Rim countries and India. Based on its closing price Friday, the general offer could be worth about US$55 million. SingTel, which is Southeast Asia's largest telco, has been trying to expand into the region, but efforts to buy Cable & Wireless HKT of Hong Kong and Malaysia's Time dotCom last year were scuppered for political reasons.
It is currently in the process of buying Australia's Cable & Wireless Optus Ltd. It faces a bill of A$20 billion (US$820 million) in cash, stock, bonds for the takeover.
In a separate development, PacNet announced Friday that its chief financial officer, Chiam Heng Huat, will be leaving on June 15 for personal reasons. In a press release, the company said deputy finance directors Raymond Yeo and Nancy Tan will assume his responsiblities. PacNet also appointed Tan Jee Toon general manager of its Pacfusion.com portal.