Gartner: Temasek's latest Thai buy to boost SingTel

Temasek Holdings' plan to acquire a 49.6 percent share in Shin Corp, will strenghthen SingTel's regional expansion plans, and help the carrier achieve operational efficiencies.

SINGAPORE--Temasek Holdings' announcement Monday to acquire almost 50 percent share in Thai group Shin Corp, is likely to help fuel SingTel's growing Asia-Pacific carrier operations, translating the deal into a financial success, says a Gartner analyst.

A majority shareholder of Singapore-based carrier SingTel, Temasek formed an alliance with Siam Commercial Bank and a group of Thai investors, to buy 1,487.7 million shares from Shin Corp.'s Shinawatra and Damapong families. This would give the Singapore-based company and its Thai investors a 49.6 percent stake in Shin Corp. Thailand's prime minister, Thaksin Shinawatra, is a member of the Shinawatra family.

Temasek is forking out 73.3 billion Thai baht (US$1.87 billion), or 49.25 Thai bhat (US$1.26) per share, as part of the agreement.

According to local media reports in Singapore, Shin Corp has a 43 percent stake in Advanced Info Services (AIS) which controls more than half of the Thai mobile phone market. SingTel currently holds a 21 percent stake in AIS.

Gartner analysts noted that the latest deal will help drive SingTel's goal to capture not only the Thai market, but also the rest of the Asia-Pacific market, according to Gartner. Shin Corp's business interests encompass areas such as wireless, broadband, satellite and transportation.

"SingTel… is gradually not only starting to connect the dots in the Asia-Pacific landscape, but is also increasingly able to define these dots with the growing stake in some of these carriers," Eleana Liew, principal analyst at Gartner, said in a statement.

SingTel currently owns Australia's second largest telecom operator Optus, and has shares in various regional mobile carriers including Globe in the Philippines, Bharti Telecoms/Tele-Ventures in India, Pacific Bangladesh Telecom and Telkomsel in Indonesia.

Liew added the latest agreement will likely allow SingTel to enjoy reductions in procurement costs for handsets and infrastructure by having a stronger negotiation voice with suppliers over delivery schedules, and preferential cellular voice- and data-roaming relationships, among other benefits.

However, she noted that Thailand's mobile market growth is projected to be in the single digit over the next five years, and is a highly competitive industry segment. AIS' new shareholders "will have their hands full" growing their revenues with increasing pressure on their margins, she said.

"Until the deal is announced in details, it remains to be seen how much of a synergy there would be for both the SingTel Group and AIS, and whether this would translate into any financial benefits," said Liew.

This latest agreement is believed to be the Temasek's biggest-ever foreign purchase of a Thai company, and also its largest single foreign investment so far.