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Why SingTel is keeping Optus Satellite

Singapore Telecommunications considered partnerships and the sale of its Australian satellite unit before deciding this week to invest further in the business. Here's why.
Written by Andrew Nusca, Contributor
Photo: Jeffrey James Pacres/Flickr

Until this week, Southeast Asia's largest phone company was seeking more than A$2 billion (US$1.8 billion) for its Optus Satellite unit, which provides radio, television, phone and data signals to Australia, New Zealand and the Antarctic.

Then it decided that driving even more money into the business would pay greater dividends.

In an interview with Bloomberg, Singapore Telecommunications chief executive Chua Sock Koong said that partnerships or an outright sale of the profitable satellite unit were on the table before the company changed its mind

Why the change of heart? The growing disparity between the Australian dollar and its Singapore counterpart, for one, as well as the lack of synergy between the satellite unit and the rest of the company.

Reports of lower-than-expected bids in a potential initial public offering scenario also didn't help.

The satellite business was acquired when SingTel took over Australia's Optus in 2001 for US$9.7 billion. The company's interest in selling it was primarily for the S$2 billion in cash it would need to make acquisitions to expand its digital operations.

The company still has those plans, including designs to launch another satellite in the next year. SingTel managed to partially address fiscal concerns by cutting costs at its Optus unit; you can read my colleague Ryan Huang's report on its latest earnings here.

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