Analyst: SingTel/Optus stronger in Asia than Australia

Singapore Telecommunications Ltd. (SingTel) and its new A$17.2 billion Australian acquisition, Cable & Wireless Optus are well-positioned to succeed in Asia but face a formidable challenge from dominant carrier Telstra in Australia, according to telecommunications analyst Paul Budde.

In a report issued Thursday, Budde said that the SingTel/CWO partnership has many positive aspects, which will be attractive to their corporate customers and position it well to pursue regional business-to-business (B2B) e-commerce opportunities.

Among its most important assets, according to Budde, the integrated company has:

-- new submarine cable networks C2C and Southern Cross, which complement each other well-- the SingTel Internet Exchange, the largest in Asia-Pacific (excluding Japan), used by more than 70 ISPs (Internet service providers) in 30 countries-- CWO's national fiber-optic backbone in Australia-- SingTel's regional Internet data center business spanning Australia, China, Hong Kong, Japan, Korea, Singapore and Taiwan. Budde believes that the fully integrated SingTel/Optus company will be more streamlined and focused than the Telstra/Pacific Century CyberWorks (PCCW) partnership, with its separate joint venture companies, and thus better positioned to compete in the Asia-Pacific market.

"If they play their cards right, they could beat Telstra/PCCW hands down in the international market," Budde said in the report.

Like other analysts, Budde is less confident about the new SingTel/CWO company succeeding in Australia.

It faces a dominant and tough opponent in Telstra, which leverages a self-regulatory environment to its benefit. SingTel and CWO -- as well as Singapore and Australia -- are culturally very different, and SingTel is entering a market much bigger than its tiny home base of Singapore.

"I am doubtful as to whether the SingTel management is up to the battle," Budde said. "It was not for nothing that Telstra's share price increased while the Optus and SingTel listings were dropping."

SingTel's share price fell 14 percent to an all-time low of S$1.88 (US$1.05 ) on the news of its acquisition of CWO. In heavy trading in following days, the stock has failed to recover.

"I don't see this (success for SingTel/CWO) happening in the national (Australian) market," Budde said in the report.

SingTel, in Singapore, can be reached at +65-838-2007 or via the Web at http://www.singtel.com/. CWO, in Sydney, can be reached at +61-2-9342-7846 or via the Web at http://www.cwo.com.au. Telstra, in Sydney, can be reached at +61-2-9206-0106 or online at http://www.telstra.com/.

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