SingTel and Cable & Wireless Optus

By Andrew Inkpen & Chung Sang Pok

Abstract

In late April 2001, senior management at Singapore Telecommunications Limited (SingTel) were working hard to finalise their position on the proposed acquisition of the Australian firm, Cable & Wireless Optus Limited (Optus), the second largest telecommunication company in Australia. A successful acquisition would make it SingTel's most ambitious overseas investment. In a move to boost its lacklustre return on equity, SingTel was on the lookout for regional investment opportunities. SingTel believed that the acquisition of Optus would help the company become the leading integrated communications service provider in the Asia Pacific region. The acquisition would also give SingTel sizeable regional leverage and scale.

SingTel's proposed bid was expected to be around A$15 billion in a cash-and-share offer for a 53 percent stake in Optus. The acquisition was expected to dilute the Singapore government's stake in SingTel from the prevailing 78 percent to below 70 percent. Other possible contenders for Optus were the Telecom Corporation of New Zealand and Vodafone Group PLC. In order to convince Optus shareholders to agree to the acquisition, it was essential to identify a compelling strategic rationale for the deal as well as significant benefits for both SingTel and Optus. In addition, the significant risk factors in the deal had to be clearly identified.

Issues: Merger and Acquisitions, Strategic Fit and Rationale

View case details in our E-catalog ››

About the Authors