Temasek Holdings office is seen in Singapore. The company is planning to sell its $3.1bn stake in Thai telecom company Shin Corp to SingTel unit.

Reuters/Singapore/Hong Kong 

Singapore state investor Temasek Holdings Pvt is seeking to sell its $3.1bn stake in Thai telecom company Shin Corp and has approached its SingTel unit as a possible buyer, people familiar with the matter said.

Heralding an overhaul of its telecom assets, Temasek held talks with SingTel late last year about selling the 41.6% of Shin Corp it owns through a subsidiary, the people said. They declined to be identified as the information is not public.

Talks over a stake in the company that controls the biggest Thai mobile telecoms operator and was bought from the family of ousted former prime minister Thaksin Shinawatra have since stalled amid political tensions in Thailand, the people said. SingTel, formally known as Singapore Telecommunications Co, is 52%-owned by Temasek.

The move by Temasek, which oversees $170bn in assets, is in line with its plans to consolidate portfolio companies in industry groupings. This would be its first move toward bringing its telecoms assets under one roof, analysts said, potentially creating a regional giant.

The Temasek stake in Shin Corp is worth $3.1bn by current market value. Shin Corp’s shares now trade more than 50% above the price paid in 2006 by a Temasek-led consortium, that included Chinese-Thai businessman Surin Upatkoon, when it bought 96% of the Thai firm for a total of $3.8bn.

“At a fair price such a deal would make sense for SingTel,” Chris Lane, senior analyst at Sanford C Bernstein in Hong Kong who covers Asia-Pacific telecommunications.

Shin Corp owns 40.5% of Thailand’s biggest mobile telecoms company, Advanced Info Service.  SingTel already has a 23% stake in AIS: Adding the Shin Corp stake would cement its position in a bigger market and offset sluggish growth in mature economies where it’s also present, like Australia.

“SingTel executives are involved in the day-to-day operations of the company,” said Bernstein analyst Lane. “Buying the stake from Temasek avoids the possibility of another ‘telco’ securing a significant interest in AIS.”

Other Temasek telecoms holdings apart from SingTel include an indirectly owned stake of about 3% in Indian mobile carrier Bharti Airtel, as per a filing from last August, worth close to $600mn at current market prices.

It also controls the wholly owned Singapore Technologies Telemedia – a communications business that houses assets like broadband networks in Malaysia and the Philippines and is valued by Temasek at $2.7bn as of last March.

Temasek’s telecoms strategy mirrors what it has tried to do in other business segments – with varying degrees of success.

Last year its financial services portfolio company DBS Group Holdings made a bid for Bank Danamon Indonesia Tbk , but it failed to get approval from Indonesian regulator. The future of its 18% stake in London-based bank Standard Chartered is a constant source of speculation for bankers, who have previously suggested merging Standard Chartered with DBS.

The slowdown in Shin Corp deal talks makes it the second potential transaction in Thailand to be put on the back burner due to political stalemate. ING Groep’s planned sale of a 31% stake in TMB Bank has also hit roadblocks, Reuters previously reported.

Shin Corp occupies a position of symbolic importance in Thailand. Along with Thai investors, Temasek and Surin Upatkoon bought the 96% Shin Corp holding in 2006 through a vehicle known as Cedar Holdings. While Cedar has since sold most of its ownership, Temasek remains a Shin Corp shareholder through a subsidiary called Aspen.

The change in its ownership triggered accusations of insider trading and tax evasion as the family of then Prime Minister Thaksin Shinawatra and others involved received $1.9bn tax-free.

Thaksin insisted at the time that the sale satisfied all the rules in a country where share sales conducted through the stock market are not taxed. Protests in Bangkok followed, ultimately leading to a coup that ousted Thaksin.

Thailand is one of 25 countries in which SingTel operates, with more than 500mn subscribers in total and more than three-quarters of its core earnings coming from outside Singapore. The company had a cash flow of S$2.5bn at the end of December.

“Given the buyer is SingTel, which wants to expand business in Thailand, the deal is quite positive for Shin Corp and AIS in particular,” said Chatchai Jindarat, telecoms analyst at Maybank Kim Eng Securities in Bangkok.