Published September 27, 2008

SingTel to gain $1b from Internet asset divestment

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BESIDES benefiting as part-owner of Singapore's new broadband network, SingTel could gain an additional $1 billion from divesting non-strategic Internet assets. As part of its winning bid, OpenNet has proposed a leasing arrangement with SingTel to tap the latter's passive Internet infrastructure such as ducts, manholes and exchange buildings.

To handle the leasing arrangement, SingTel will create a wholly owned unit called the AssetCo and transfer assets to this entity. According to SingTel Singapore CEO Allen Lew, the company will gradually divest its shareholding in the AssetCo over the next five years to meet the IDA's mandate for structural separation. The regulator prohibits Internet service providers from owning more than a 30 per cent stake in the infrastructure company tasked to build and own the new broadband highway.

Analysts estimate that SingTel's current Internet infrastructure could be worth $2.8 billion and that it could be looking to sell as much as a 70 per cent stake in the AssetCo to meet the official directive. This could translate to divestment income of more than $1 billion for SingTel in the next five years. SingTel will migrate to a leasing model by renting the infrastructure from the NetCo, Mr Lew said.