THE DISTILLERY: Singapore blues

Too often, when a merger or acquisition hits a wall, it's largely forgotten. This is particularly unfortunate when a regulator is the opposing force because it prevents scrutiny of their decision, and whether it was in fact justified. Fairfax's Ian McIlwraith has kept a close eye on Singapore Exchange after Treasurer Wayne Swan said it could not merge with our own bourse, ASX Ltd, due to concerns about how Singapore's government might then influence Australian markets. Its terribly disappointing performance since Swan's intervention is unquestionably a dodged bullet, but as McIlwraith explains, the Treasurer didn't reject the deal because he sensed coming weakness in the suitor's stock. Meanwhile, one commentator puts a bullet into the idea of a special, NBN-inspired dividend from Telstra, while another highlights a contradiction in Malcolm Turnbull's argument against 100 Mbps.

But first, Fairfax's Insider columnist, Ian McIlwraith, hasn't forgotten to keep watching the fluctuation in share prices of ASX Ltd and Singapore Exchange. He's found that while ASX hasn't exactly hit a purple patch, Singapore Exchange definitely has the blues.

"Swan's rejection of the Singapore merger proposal was made on national interest grounds, much of it due to concerns about how much influence Singapore's government might exercise over Australia's financial markets, rather than any evaluation of likely financial outcomes. On the other hand, Singapore Exchange chief executive Magnus Bocker, who had to deliver what can best be described as a flat half-year result to shareholders yesterday, must go to bed nightly cursing Swan for what might have been… He now, though, has a situation where the SGX's market worth has shrunk more than 30 per cent compared with a fall of only 12 per cent by the ASX since the two announced their merger proposal.”

Elsewhere, The Australian's John Durie has scoffed at the excitement of some Telstra shareholders who are hoping that the $11 billion deal with the government will produce a special dividend.

"Old timers at Telstra regard special dividends as anathema. Goldman Sachs analyst Christian Guerra told this column: ‘There is no way Telstra will have a special dividend'. Recently retired CFO, board member and Geelong Cats tragic John Stanhope was a vocal opponent of special dividends because he argued that they had zero value for long-term shareholders.”

The Australian Financial Review's Chanticleer columnist, Tony Boyd, points out the obvious contradiction in Opposition Communication spokesperson Malcolm Turnbull's claims that Telstra's HFC network – capable of providing national broadband network speeds – should be utilised rather than decommissioned, while adding consumers are unwilling to pay a premium for these high speeds in the first place.

"Turnbull's deeper problem with the NBN is the vast majority of residential users have no near-term use for the 100 Mbps speed that will be available on fibre. He says international experience tells us that even fewer will pay much of a premium for those speeds. But this conflicts with Telstra's own business plan prepared to justify the upgrading of the HFC cable around Australia. Telstra looked at the exponential growth in data usage, the cost of upgrading the network, and likely demand for a 100 Mbps service. The top-tier plan under the Bigpond Ultimate Cable plan offers 500 GB of downloads of data a month at a minimum cost over 24 months of $3165.60 plus $9.95 delivery. Also, you must purchase a new modem.”

And fourthly in this morning's Distillery, The Australian's Paul Garvey delivers a sizeable feature on "The Kiwi Oligarch”, New Zealand's Stephen Jennings, who is set to become a real force to be reckoned with in Africa through his company Renaissance Group.

"Since taking a strategic call on Africa five years ago, Renaissance has become one of the largest real estate holders on the continent, building from scratch six new cities in Kenya, Ghana, the Democratic Republic of Congo, Zambia and Zimbabwe. The group is also a major shareholder of the pan-African Ecobank and the world's largest private game reserve, Zimbabwe's Bubye River. If, as Mr Jennings predicts, sub-Saharan Africa will be one of the few markets globally offering real growth in the next few years, Renaissance faces very little competition in taking advantage of it.”

Staying with mining to round out this morning's business commentaries, The Age's Garimpeiro columnist, Barry Fitzgerald, ran the ruler over Rio Tinto's results and found an initially reassuring 7.3 per cent growth in profit masking a big slowdown. In related news, given Rio's reliance on a healthy Chinese steel market, Fairfax's Philip Wen says that not only was the fourth quarter GDP data out of Beijing better than expected and in line with China's plan to cool inflation, but it's also old statistical news.

In Australian company news, The Australian's John Durie suggests that former Newcrest Mining chief executive Ian Smith could be taking the reins at Orica just in time, with widely respected Orica boss Graeme Liebelt battling in his last day to contain the fallout from the Kooragang Island ammonia plant leaks.

Elsewhere, The Sydney Morning Herald's Jessica Irvine injects some much needed new life into the tired Australian Goldilocks economy analogy and concludes that, despite the global gloom, there's good reason to hope this year.

And finally, The Australian's Glenda Korporaal offers up an analysis on the implications of the hatchet job that Republican nominees in the US presidential primaries are running against frontrunner Mitt Romney for his involvement with private equity firm Bain Capital. This is particularly pertinent to Australia given private equity's increased activity in recent months and its clouded reputation.