StarHub is forking out up to $162.8 million to acquire a 50.1% stake in MyRepublic's broadband business in Singapore, taking out the latter's 6% share in the local market. This will see the MyRepublic business unit subsumed as a StarHub subsidiary when the transaction is finalised.
MyRepublic carved out a new entity, called MyRepublic Broadband, for the transaction, which would encompass its consumer and enterprise customers in the city-state. StarHub Online, which comprises the telco's broadband business, would acquire the MyRepublic shares.
The acquisition would push StarHub's share of the local broadband market to 40%, the two companies said in a joint statement Wednesday. MyRepublic currently has a 6% share of the market.
In an email reply to ZDNet, MyRepublic's chief investor relations officer Jeannie Ong confirmed the deal would only cover its broadband business in Singapore, and would not impact its mobile business here, as well as its platform business and other overseas entities. Its franchise partnership with Indonesia's Sinar Mas Group also remains unchanged.
"We continue to retain 100% ownership of these," Ong said. "Naturally, the transaction impacts all our businesses favourably, as the capital raised will be used to accelerate our plans in all markets and also for our platform business."
In a June 2021 report, MyRepublic told ZDNet it was looking for new revenue in Singapore's enterprise space, with plans to ramp up its service offerings with particular focus on cybersecurity, where it might look to make acquisitions to plug product gaps. It also had eyes on growing its enterprise business, where it saw large margins and growth potential.
MyRepublic then had some 6,000 enterprise customers including small and midsize businesses and large organisations, as well as 85,000 broadband subscribers in Singapore. As at May 2021, it also had 70,000 mobile subscribers. It launched its mobile business here in 2018.
The Singapore market remains the main revenue source for the operator, which also offers broadband services in Australia and New Zealand.
StarHub's investment would include an initial consideration of $70.8 million for the 50.1% stake and a $92 million deferred consideration dependent on future financial performance. The Singapore telco also would refinance $74.2 million of debt for MyRepublic over a span of three years, upon completion of the transaction.
The latter would retain 49.9% share, with its senior management team including co-founder and CEO Malcolm Rodrigues remaining in his role. The acquisition was slated to be completed by end-December, subject to the usual regulatory approvals.
The acquisition would provide MyRepublic customers access to StarHub's range of consumer and business offerings, including over-the-top content and online games. The two companies added that they also would achieve cost savings, scale, and synergies through joint go-to-market opportunities and wholesale service offerings.
StarHub CEO Nikhil Eapen said in the statement: "We intend to scale up and deliver better and faster services to our customers, while realising high-quality earnings accretion. We stand to mutually benefit from StarHub's digital-first technology platforms, our challenger mindset in innovation and customer-centricity, and MyRepublic's lean operating model and experiences in regional markets."
Rodrigues said: "This milestone propels us forward in MyRepublic's journey towards IPO. With StarHub onboard as a key investor, we are charting a new course for the long-term direction of the industry."
In a note to MyRepublic's broadband customers in Singapore, Rodrigues described the deal as a "historical moment" for the company, after a decade of operations here. He said the investment put the company in "a stronger financial position" for IPO and enable it to scale up operations.
"In due course, more details will be released on the additional access for myRepublic broadband customers as a result of this partnership," he added.
MyRepublic earlier this month suffered a third-party security breach that compromised personal data of 79,388 mobile subscribers. The mobile operator had declined to reveal further details about how the data breach was discovered, saying only that it was informed of the incident by "an unknown external party" on August 29.
When asked, Ong said it would work closely with StarHub as part of the due diligence process under the acquisition agreement. She added that they would work to gather information about MyRepublic's data privacy and security compliance as well as to safeguard StarHub's interests as an investor.
"The recent data breach incident affects MyRepublic's mobile business in Singapore and MyRepublic has taken all the necessary steps to respond to the incident appropriately," she said, noting that it still was working with the relevant authorities on the investigations. "Our data breach incident has had no bearing on the partnership with StarHub, which follows comprehensive due diligence, review, and evaluation of the relevant synergies between both parties."