Exclusive: Temasek seeks to sell $3.1 billion stake in Thailand's Shin Corp to SingTel - sources

SINGAPORE/HONG KONG (Reuters) - Singapore state investor Temasek Holdings Pvt Ltd is seeking to sell its $3.1 billion stake in Thai telecom company Shin Corp and has approached its SingTel unit as a possible buyer, people familiar with the matter said.

Heralding an overhaul of its telecom assets, Temasek held talks with SingTel late last year about selling the 41.6 percent of Shin Corp it owns through a subsidiary, the people said. They declined to be identified as the information is not public.

Talks over a stake in the company that controls the biggest Thai mobile telecoms operator and was bought from the family of ousted former prime minister Thaksin Shinawatra have since stalled amid political tensions in Thailand, the people said. SingTel, formally known as Singapore Telecommunications Co, is 52 percent-owned by Temasek.

The move by Temasek, which oversees $170 billion in assets, is in line with its plans to consolidate portfolio companies in industry groupings. This would be its first move toward bringing its telecoms assets under one roof, analysts said, potentially creating a regional giant.

The Temasek stake in Shin Corp is worth $3.1 billion by current market value. Shin Corp's shares now trade more than 50 percent above the price paid in 2006 by a Temasek-led consortium, that included Chinese-Thai businessman Surin Upatkoon, when it bought 96 percent of the Thai firm for a total of $3.8 billion.

"At a fair price such a deal would make sense for SingTel," Chris Lane, senior analyst at Sanford C. Bernstein in Hong Kong who covers Asia-Pacific telecommunications.

THAI MARKET LEADER

Shin Corp owns 40.5 percent of Thailand's biggest mobile telecoms company, Advanced Info Service Pcl . SingTel already has a 23 percent stake in AIS: Adding the Shin Corp stake would cement its position in a bigger market and offset sluggish growth in mature economies where it's also present, like Australia.

"SingTel executives are involved in the day-to-day operations of the company ," said Bernstein analyst Lane. "Buying the stake from Temasek avoids the possibility of another 'telco' securing a significant interest in AIS."

Other Temasek telecoms holdings apart from SingTel include an indirectly owned stake of about 3 percent in Indian mobile carrier Bharti Airtel Ltd , as per a filing from last August, worth close to $600 million at current market prices.

It also controls the wholly owned Singapore Technologies Telemedia - a communications business that houses assets like broadband networks in Malaysia and the Philippines and is valued by Temasek at $2.7 billion as of last March.

Temasek's telecoms strategy mirrors what it has tried to do in other business segments - with varying degrees of success.

Last year its financial services portfolio company DBS Group Holdings Ltd made a bid for Bank Danamon Indonesia Tbk , but it failed to get approval from Indonesian regulator. The future of its 18 percent stake in London-based bank Standard Chartered PLC is a constant source of speculation for bankers, who have previously suggested merging Standard Chartered with DBS.

POLITICAL STALEMATE

The slowdown in Shin Corp deal talks makes it the second potential transaction in Thailand to be put on the back burner due to political stalemate. ING Groep's planned sale of a 31 percent stake in TMB Bank Pcl has also hit roadblocks, Reuters previously reported.

Shin Corp occupies a position of symbolic importance in Thailand. Along with Thai investors, Temasek and Surin Upatkoon bought the 96 percent Shin Corp holding in 2006 through a vehicle known as Cedar Holdings Ltd. While Cedar has since sold most of its ownership, Temasek remains a Shin Corp shareholder through a subsidiary called Aspen.

The change in its ownership triggered accusations of insider trading and tax evasion as the family of then Prime Minister Thaksin Shinawatra and others involved received $1.9 billion tax-free.

Thaksin insisted at the time that the sale satisfied all the rules in a country where share sales conducted through the stock market are not taxed. Protests in Bangkok followed, ultimately leading to a coup that ousted Thaksin.

Thailand is one of 25 countries in which SingTel operates, with more than 500 million subscribers in total and more than three-quarters of its core earnings coming from outside Singapore. The company had a cash flow of S$2.5 billion at the end of December.

"Given the buyer is SingTel, which wants to expand business in Thailand, the deal is quite positive for Shin Corp and AIS in particular," said Chatchai Jindarat, telecoms analyst at Maybank Kim Eng Securities in Bangkok.

SingTel has been seeking to overhaul a portfolio of telecoms investments that include stakes in Bharti Airtel - help separately form Temasek's - Australia's Optus, Globe Telecom Inc in the Philippines and Indonesia's PT Telkomsel. Last year, it unsuccessfully tried to sell the Australian satellite business.

A spokesman for Temasek declined to comment on the talks, but added, "We are a long-term investor in Asia including in

ASEAN."

A Shin Corp official in Bangkok declined to comment, while a SingTel spokeswoman also declined comment.

SingTel shares closed 0.6 percent lower on Tuesday, while the benchmark Strait Times index <.FTSTI> ended little changed. Shin Corp shares fell nearly 2 percent, while the Bangkok index was 0.5 percent lower.

(Additional reporting by Khettiya Jittapong in Bangkok and Rujun Shen in Singapore; Editing by Kenneth Maxwell)

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