JPMorgan hired for Optus minority stake sale to Brookfield

Singtel could sell a partial stake in Australia’s second-largest telco, Optus. Picture: Brendon Thorne/Getty Images

Singapore telecommunication company Singtel is understood to have mandated investment bank JPMorgan to consider the sale of a minority stake in its Australian telecommunications company Optus to Brookfield, say sources.

Experts around the market estimate that the stake up for discussion is between 20 to 50 per cent of the business.

It comes after suggestions that Singtel was considering an initial public offering of Optus in 2022 through Morgan Stanley, as reported by DataRoom at the time.

However, Australia’s second-largest telco soon became under fire after being subject to a cyber attack, placing any plans to list or sell the business on the backburner until it was stabilised.

Before Optus was under attack by cyber criminals, it was thought a float would have valued the equity of Optus at somewhere between $8bn and $12bn, and the latest proposed deal would peg it at a similar valuation, say sources.

It is understood that talks about a sale have been unfolding for at least a couple of months, and a deal could now be close.

Yet if a deal does not unfold, some believe that Brookfield could instead turn its attention to rival TPG Telecom which is searching for a partial buyer of its business, advised by Bank of America.

Brookfield is believed to be self advised, and is weighing into a possible acquisition of Optus after a successful investment in Vodafone New Zealand (now called One New Zealand) with Infratil in 2019 for $NZ3.4bn.

Last year, Brookfield sold its half share to Infratil for $NZ1.8bn, giving Infratil full ownership.

Yet many believe that much of the negotiations, described as “some dialogue about a stake”, are unfolding out of Asia, with the Brookfield telco team spotted out in Sydney this week, leading some to conclude that it did not appear to be busy on a transaction.

Brookfield has declined to comment.

Optus is fully owned by Singtel, and two years ago, the understanding was that the Singaporean telecommunication company had been considering a selldown of Optus at a time that it needed funds to invest more into its own business and to pay dividends to its own investors.

Singel said in an announcement on Wednesday night in response to media reports that it was selling Optus for $16bn, that there was “no impending deal to offload Optus for the said sum”.

“Optus remains an integral and strategic part of the Singel Group and we are committed to Australia for the long term.”

The company said it was focused on improving network resilience and conducting a chief executive search.

“That said, we regularly conduct strategic reviews of our portfolio to optimise the value of our assets and businesses and will explore all options to maximise shareholder value.”

Optus is the second-largest wireless carrier in Australia, with over 10 million subscribers as of 2022, and its mobile network covers 98.5 per cent of the Australian population.

It mostly owns and operates its own network infrastructure, providing services both directly to end users and also acting as a wholesale to other service providers.

Optus also provides broadband and wireless internet services, and other wholesale services include Satellite and 4G Mobile.

Its four major business divisions are Mobile, Business, Wholesale and Consumer and Multimedia.

In 2021, Optus sold a 70 per cent stake in its Australian telecommunication towers for $1.9bn in an effort to secure additional funds to roll out its 5G technology.

Singtel is the largest mobile network operator in Singapore with 4.1 million subscribers through subsidiaries and has a combined mobile subscriber base of 770 million customers.

As well as full ownership of Optus, it owns 32.15 per cent of the second-largest carrier in India, Bharti Airtel.

Singtel is Singapore’s second largest publicly listed business and counts Temasek Holdings as its majority investor, which is the investment arm of the Singaporean government.