Prospective Cable & Wireless Optus buyer Singapore Telecommunications (SingTel) is not up to the battle of becoming a serious threat to Telstra's dominance in Australia, according to telecommunications analyst Paul Budde.
"We are back to a two-horse race. However, the second horse is still only a fraction of the size of the big horse. Moreover, the big horse is protected by the government by dint of the self-regulatory environment in which it is permitted to operate."
SingTel recently made an offer to Optus' parent company Cable & Wireless for up to $4.57 per share, thereby valuing the company at up to $17.2 billion. (CW April 2, p12)Budde is doubtful SingTel's management is up to the battle to seriously compete within Australia's telecommunications arena as the Asia-Pacific telecommunications company is a "small player in the overall scheme of things".
SingTel is 78 per cent owned by the Singapore government and has two million domestic users, which is smaller than Optus.
"Furthermore, the cultures of SingTel and Optus are completely different. SingTel's owner doesn't have a good track record in terms of democracy and it is well-known that they have used the telephone network in ways that would not be sanctioned in Australia."
Budde adds that he doesn't think these "negative cultural factors" could be transferred to Australia, but that there are fundamental differences between the two countries, companies and people involved.
"These differences will surface during the integration of Optus into SingTel and will inevitably lead to clashes which could hamper the position of the company as the country's main competitor to Telstra," Budde said.
"It was not for nothing that Telstra's share price increased while the Optus and SingTel listings were dropping."
On the positive side, Budde hopes SingTel's experience in broadband will be transferred to our shores. The company was one of the first in the world to launch a nationwide broadband network.
"Another big positive is that the two companies will merge and thus be much better positioned than, for example, Telstra/PCCW to compete in the Asia Pacific market."