Is TPG Telecom Ltd expanding into Singapore?

TPG Telecom Ltd (ASX: TPM) has reportedly submitted a bid to buy Singapore’s fourth mobile-phone licence, according to The Australian Financial Review (AFR).

According to the report, TPG is one of three companies vying for the network licence – along with MyRepublic and airYotta – that’s according to the Infocomm Development Authority of Singapore.

The AFR says that the Singapore government wants to improve services and increase competition for the 5.4 million people that call Singapore home. The winning bid will receive its mobile licence in April 2017 and have 18 months to build its network.

Given the size of Singapore relative to Australia, you can see why TPG is looking closely at this deal, considering the cheaper network cost in Singapore. The AFR reports that a network could be built for between $500 and $700 million and wouldn’t take very long given Singapore’s size.

Media reports and market commentators have long suspected that founder and Executive chairman David Teoh wants to move into the mobile network space. In Australia, that could cost billions either via the acquisition of the Optus or Vodafone networks, or building its own.

Vodafone has reportedly said it would consider selling its Australian operation for the ‘right price’ and media reports suggest the company canvassed potential buyers in late 2014. Optus – owned by Singapore Telecommunications could also be a potential buy for TPG Telecom, but the cost would be prohibitive. In 2016, Optus generated $2.8 billion in earnings before interest, tax, depreciation and amortisation (EBITDA). Apply a multiple of 8x and you get a purchase price of $22 billion.

However, TPG might be able to find a way in an Australian network via Hutchison Telecommunications (AUS) Ltd (ASX: HTA) – which owns half of Vodafone’s network. Hutchison has a market cap of just over $1 billion –suggesting that the Vodafone network would be much cheaper to buy than Optus.

Foolish takeaway

Telstra Corporation Ltd (ASX: TLS) has also hinted at its plan to grow via offshore expansion, although it appears odd that the company has not put in a bid for the Singapore mobile network. This could be another case of TPG Telecom outsmarting its larger rival.

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Motley Fool writer/analyst Mike King owns shares in TPG Telecom and Telstra Corporation. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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