Singtel shares surge 7.5% on potential union of Australia telecom rivals

A POTENTIAL marriage between two rivals in Australia could bring joy to South-east Asia's largest telco, Singapore Telecommunications Ltd (Singtel).

A merger between Vodafone Hutchison Australia Pty and TPG Telecom Ltd would see Singtel facing less competition in Australia, where it generates over half of its revenues.

"If a deal does proceed, we believe it would be positive for Singtel's Australian business, Optus," Citigroup Global Markets Inc's analyst Arthur Pineda writes in a note.

Singtel shares surged as much as 7.5 per cent on Thursday, the most since May 2009 after Vodafone Hutchison and TPG Telecom said they were in "exploratory" discussions for a potential merger.

A deal would also have implications for Singtel's domestic market of Singapore as a TPG Telecom unit won the bid to become the city-state's fourth mobile-phone operator.

"We believe the implications for the Singapore mobile market are less clear cut as there are no indications that TPG Telecom's aspirations are off the table," writes Ramakrishna Maruvada, an analyst at Daiwa Capital Markets Singapore Ltd in a note. "However, the negotiations itself suggest rational, return-seeking behaviour on the part of TPG, which lowers the odds for an aggressive, disruptive market entry, in our view."

Mr Maruvada upgraded Singtel to outperform from hold following the announcement of the possible merger plans among its Australian rivals.

The Singapore carrier itself is said to be examining a possible bid for Amaysim Australia Ltd which would give it access to the operator's more than 1.1 million mobile subscribers.

BLOOMBERG