Optus Satellite may be spun off

Singapore Telecommunications has hired financial advisers to review its Australian satellite business, raising the possibility of a sale or public listing of Optus Satellite.

SingTel and its Australian subsidiary, Optus, are restructuring in a flat market for mobile subscriber growth. The strategic review follows Optus' recent announcement of a business transformation program. The company said it wanted to conduct a review to "optimise value for shareholders".

Analysts and bankers say the strategic review could mean an outright sale or a public listing of a unit that offers free-to-air and pay TV, mobile telephony and broadband services to 2 million Australian customers.

Optus Satellite had revenue of $319 million for the financial year to March 31, 2012.

Sachin Gupta, an analyst at Nomura Securities, valued Optus' satellite asset at about $1.5 billion to $2 billion and he estimated the margin for the business could be 80 per cent.

"It's not the first time SingTel has reviewed this, we understand. Given its extensive portfolio, it constantly reviews its assets and networks, looking for ways to monetise," Mr Gupta said. "If the the buyer is willing to pay seven or eight times the earnings before interest tax, depreciation and amortisation multiple for these assets, then why not?"

Optus is the only Australian-based telco to own and operate a fleet of satellites. It is due to launch another new satellite - Optus 10 - this year.

It is believed that Optus has a fleet of relatively new satellites, most of them having been launched in the second half of 2010. Its oldest satellite, B1, was launched in 1994. Satellites last 12 to 15 years.

Optus Satellite customers include broadcasters and government agencies such as the ABC, Foxtel, SBS, Southern Cross, WIN, NBN Co, and the NSW Department of Education. Optus also provides satellite services to the Australian Defence Force.

Australia is the largest business unit in SingTel group and accounts for more than half its revenue.