The Infocomm Development Authority of Singapore (IDA) is seeking public feedback on SingTel's proposed acquisition of the country's fiber broadband network builder OpenNet through its business trust.
The review comes amid public scrutiny on whether the deal might result in giving SingTel an unfair advantage against other Internet service providers such as M1, StarHub and other new players. This, despite SingTel's assurance it will only retain an economic interest in the entity without any effective control, and remain operationally separate.
IDA will ensure that the proposed transaction does not result in a substantial lessening of market competition or harms the public interest, it said in a statement on Wednesday.
The regulator added it reserved the right to impose conditions on the transaction, which could include the divestiture of certain operations or assets and behavioral safeguards such as accounting separation.
The feedback process will close in three weeks and IDA expects to complete its review in 120 days.
While 95 percent nationwide coverage was achieved for both residences and offices in mid-2012, there are still criticisms against OpenNet over installation and activation delays partly due to its inability to cope with spikes in demand.
Scrutiny over consolidated shareholding structure
Under the proposed deal last Thursday, OpenNet's four shareholders--SingTel (30 percent), SP Telecommunications (15 percent), Singapore Press Holdings (25 percent) and Canada's Axia NetMedia (30 percent)--will sell their stakes for S$126 million to NetLink Trust.
If the deal is approved, NetLink Trust will integrate with OpenNet's operations and staff, a move it said will help streamline the industry to achieve "greater efficiencies".
In its application for regulatory approval, NetLink Trust noted the current structure's "chain of command" was particularly complex when identifying and remedying faults along the NBN. It explained a consolidated entity would reduce the layers of communication required.
""The competitive benefits are also not apparent in how it will improve the operational efficiency of OpenNet or lower costs for consumers."
The potential implications of the shareholding structure is being examined closely.
As part of conditions to ensure fair competition when SingTel won its bid in 2008 as part of the OpenNet consortium, it was required to set up an independent asset company--NetLink Trust. The trust was used to park various SingTel assets such as ducts, manholes and exchanges which it owned as the telecoms incumbent. These assets were important in cutting down the NBN fiber rollout time to open up market access to non-incumbents--a process otherwise potentially more protracted if the infrastructure remained controlled by a competitor.
Another condition required SingTel to divest and sell down its stake in the trust to under 25 percent by April 2014, which the telco has requested to extend to 2018 under the proposal.
While NetLink Trust is owned by SingTel, it is managed by trustee-manager CityNet. This means SingTel's shares only give it economic benefits but no effective control to influence any major decisions. SingTel's power is limited to appointing not more than 30 percent of CityNet's board, which is majority made up of independent directors.
The proposed deal has been slammed by rival telco M1, which said it would further entrench SingTel's incumbent position. "The competitive benefits are also not apparent in how it will improve the operational efficiency of OpenNet or lower costs for consumers [as promised in the proposal]."
Jeannie Ong, StarHub's chief marketing officer, said the company would provide its feedback after studying the consultation. "We are particularly interested in how this transaction could improve OpenNet's poor performance on service provisioning record for non-residential customers," she added.