StarHub in advanced talks with Keppel over M1 deal: sources

[SINGAPORE] StarHub is said to be in advanced talks with Keppel over a potential deal involving M1, in the latest push towards consolidation in Singapore’s telecommunications sector.

The telecommunications company recently made an offer to Keppel, and discussions are ongoing, sources told The Business Times.

The talks come after Simba’s proposed S$1.4 billion acquisition of M1’s telco business fell through in May this year. Keppel has since said it remains open to opportunities to divest M1.

A separate report by trade publication TMT Finance noted that both StarHub and Keppel have already appointed financial advisers, with JPMorgan advising StarHub and DBS advising Keppel and M1.

StarHub and M1 were reported to have explored a potential merger in 2024, but no deal materialised.

A potential deal would bring together two telcos with links to Temasek’s portfolio. Temasek is a controlling shareholder of both StarHub and Keppel, with a 56.1 per cent deemed interest in StarHub, through Singapore Technologies Telemedia and other portfolio entities, and a 21.5 per cent total interest in Keppel, which controls M1.

Temasek is also the controlling shareholder of Singtel, giving it exposure to three of Singapore’s four mobile network operators.

A S$1.4 billion deal between Simba and M1 collapsed in May after the Infocomm Media Development Authority suspended its assessment of the transaction while investigating Simba’s unauthorised spectrum usage.

Simba on Wednesday admitted that it has exceeded its limits on its 2,300 megahertz spectrum. The telco attributed the unauthorised usage to a combination of both hardware and software issues.

In its earnings call in August, StarHub’s management did not rule out further market consolidation, amid weakening earnings due to intense price competition among Singapore telco providers.

Nikhil Eapen, CEO of StarHub, said then that telco itself has been “driving consolidation”.

This comes on the back of the planned migration of MyRepublic mobile subscribers to the StarHub network, as well as the recent migration of customers from mobile virtual network operator redOne to its budget brand, eight.

Analysts said that bringing more customers to StarHub’s network would modestly improve StarHub’s negotiating position.

They have also noted that weakening mobile-service revenue and mounting earnings pressure among local telco operators StarHub and Singtel has further strengthened the case for consolidation.

Chris Muckensturm, analyst at Bloomberg Intelligence, said in August that industry consolidation would be needed for incumbent operators to improve their mobile-service revenue.

A StarHub-M1 transaction would reduce the number of mobile network operators in Singapore from four to three, subject to regulatory approval.

BT has reached out to StarHub, Keppel and IMDA for comments.

On Wednesday, shares of StarHub closed flat at S$1.11, while shares of Keppel rose 1 per cent or S$0.11 at S$11.21.