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A very private public transport operator

The eventual delisting of SMRT Corp by Temasek will end a 16-year float and shareholder scrutiny

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SMRT Corporation's minority shareholders decided on Thursday to take the public transport operator into state investor Temasek Holdings' fold.


SMRT Corporation's minority shareholders decided on Thursday to take the public transport operator into state investor Temasek Holdings' fold. It's just as well; in the choice of a delisting, the vote closes a chapter in what seemed to be a means (going public) to an end of becoming a multi-modal transport operator.

The vote also allows Temasek to close ranks with SMRT; there is now one less front to fight on as the larger public transport sector works on meeting commuter expectations more effectively.

Two decades ago, the government urged transport operators to become "multi-modal" - or "diversified", in industry-speak. This was so that commuters could benefit from seamless travel, and operators could be economically viable. TIBS (Trans-Island Bus Services) and SMRT then tried to forge a merger in 1999, but the marriage didn't happen. Talks broke down as the year drew to a close, with some citing pricing as an issue.

SMRT's reasoning was that it wanted to "establish the market value of its shares, and give the company greater flexibility in future discussions with possible merger partners". In other words, it wanted to (through a float) gain leverage over future negotiations to acquire or merge with other operators, possibly to become a multi-modal operator. SMRT quickly went public, and started trading on July 26, 2000.

In less than a year, SMRT knocked on TIBS' door again - this time to acquire it. SMRT's then-chairman stated that this would help reduce the time taken to transfer between bus and train, making public transport "more appealing".

The merger took effect on Dec 11, 2001. The addition of TIBS' 2,987 staff, 790 buses and 2,000 taxis to SMRT's trains made it "the first and largest multi-modal land transport provider in the country", it proclaimed in its FY2002 financial report. (Interestingly, this merger was achieved by a scheme of arrangement that Temasek also used on Thursday.) By acquiring TIBS, SMRT attained its aim of becoming a multi-modal operator in just over a year after its float.

But what SMRT also inherited was the onerous task of keeping up with capital expenditure and maintenance of rail infrastructure as larger societal and economic realities changed. If the share price was a marker of investor confidence in the operator, then its public image never recovered from the historic high of S$2.330 at the daily close on July 6, 2010; even more so when the December 2011 breakdowns increased public sensitivity to every fault, major or minor, on SMRT's lines. Not only did SMRT have to soothe commuter anger, it also had to answer shareholder queries - since every financial report that went out into the market to meet listing requirements ended up inviting more scrutiny.

Commenting on the state of public transport in Singapore on Thursday, board chairman Koh Yong Guan said wistfully: "It's an embarrassment politically to raise fares. On the other hand, it's also embarrassing for a public MRT company to make too much profit." So much so that SMRT CEO Desmond Kuek was hesitant to commit to continuing to publish financial reports after privatisation. He told the media after the meeting: "We will be looking at what it is that we should be putting out."

SMRT as a subway operator that is publicly listed was always sort of a rarity anyway. There are not many such companies, while some of those abroad - like Hong Kong's MTR Corporation and Bangkok's BTS Corporation - can develop residential and commercial property.

Fifth Schedule entity Temasek's eventual delisting of SMRT will shut down one front in the "politicised" environment of the public transport sector here. It can simplify dynamics, making it clearer, leaving the public and the government to communicate with each other more directly.

Or, as what was uttered by a middle-aged shareholder and overheard by this reporter (while waiting in an extremely long queue made up of annoyed shareholders to get into the meeting venue on Thursday): "This is the problem with too many shareholders."

Very soon, there will be only one shareholder having to satisfy commuter expectations of a reliable and efficient public transport system in Singapore.