Keppel Sells M1’s Telco Business to Simba: Unlocks S\$1 Billion Cash, Reshapes Singapore Telco Sector

Key Points from Keppel’s Management Briefing

• Keppel Ltd. has agreed to divest its telco business M1 to Simba Telecom.
• Transaction valued at S\$1.43 billion (7.3x EV/EBITDA), with Keppel receiving close to S\$1 billion in cash for its 83.9% stake.
• Keppel expects net cumulative cash proceeds of over S\$700 million, plus over S\$300 million in retained assets.
• Keppel will retain M1’s high-growth ICT business and certain strategic assets.
• Proposed transaction is expected to complete in the coming months, pending regulatory approval (IMDA).
• Keppel will post an estimated accounting loss of S\$222 million due to goodwill and intangibles, but overall IRR remains positive.
• No shareholder approval required for the transaction.

What Retail Investors Need to Know – Price Sensitive Details

• Major Capital Unlock: Keppel will receive about S\$1 billion in cash, which can be used for growth, debt reduction, or shareholder rewards. This is a significant liquidity event.
• Strategic Refocus: Keppel is moving towards an asset-light model, emphasizing digital infrastructure and high-growth ICT businesses rather than traditional telco operations.
• Financial Impact:
  • Pro Forma EPS (excluding divestment loss) will improve from 20.8 cents to 21.3 cents per share.
  • Including the divestment loss, EPS will reduce to 9.1 cents per share.
  • Net tangible assets (NTA) per share will increase from S\$4.72 to S\$5.29.
  • Net debt to EBITDA ratio will improve from 2.4x to 1.7x – substantially strengthening Keppel’s balance sheet.
• Estimated Accounting Loss: While Keppel will record an accounting loss of S\$222 million due to goodwill, the transaction is cash accretive over the long-term and the privatisation of M1 yielded positive returns.
• Retained Value: Keppel continues to own the ICT business (AsiaPac Technology Holding Pte. Ltd.), certain investments, and M1’s leasehold interest in MiWorld – collectively valued at over S\$300 million.
• Sector Impact: The merger of M1 and Simba is expected to create a stronger, more agile, digital-first telco capable of accelerating 5G and digital infrastructure investments, potentially reshaping competition and service quality in Singapore.
• No Shareholder Approval Required: The transaction does not require a vote from Keppel shareholders, streamlining execution and reducing uncertainty.

Full Details: Transaction Structure and Rationale

Keppel will sell M1’s telco business (excluding ICT and other strategic assets) to Simba Telecom for S\$1.43 billion. This is an all-cash offer at a compelling valuation, reflecting M1’s transformation since its privatisation in 2019. The deal structure ensures Keppel retains high-growth areas, such as ICT solutions and strategic investments, positioning itself for growth in the digital infrastructure space (data centres, subsea cables).

Simba’s winning bid is expected to create further revenue pools and career opportunities due to minimal overlap in resources, enhancing sector competitiveness. Keppel expects to receive total cash proceeds of about S\$2.1 billion from its investment in M1 since 1994, including dividends and divestment proceeds. The transaction is subject to regulatory conditions, including IMDA approval and the restructuring of M1 Group to carve out excluded assets.

Financially, Keppel will post a one-off loss due to goodwill accounting, reducing reported EPS in the interim, but the cash proceeds and improved balance sheet fundamentals are positive for long-term value. The retained ICT business is aligned with Keppel’s global asset-light strategy and complements its existing connectivity offerings.

Why This News Could Move Keppel’s Share Price

• Significant capital unlocked (S\$1 billion) and lower debt could lead to capital management initiatives, such as special dividends, buybacks, or new investments.
• Strengthened balance sheet and sector leadership in digital infrastructure may attract new investors focused on asset-light growth stories.
• Positive IRR and cumulative cash proceeds validate Keppel’s long-term strategy and successful transformation of M1.
• Short-term EPS impact (due to divestment loss) may cause volatility, but medium-to-long-term fundamentals are enhanced.
• No need for shareholder approval means reduced execution risk.

Conclusion

Keppel’s divestment of M1’s telco business to Simba Telecom is a landmark deal that unlocks significant value, refocuses the company on high-growth digital infrastructure, and strengthens its financial position. While accounting losses may impact short-term earnings, the transaction is strategically sound and cash accretive, offering potential upside for shareholders and positioning Keppel at the forefront of Singapore’s digital economy transformation. This is a material corporate event that could influence Keppel’s share price and investor sentiment in both the short and long term.

Disclaimer: This article is for informational purposes only and does not constitute financial advice or a recommendation to buy or sell securities. Investors should consult their own advisors and do their own due diligence before making investment decisions. The author is not responsible for any actions taken based on the content of this article.

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