The ASX telecommunications space has been abuzz with rumours in recent days. And these rumours seem to be bleeding into ASX telo shares like Telstra Group Ltd (ASX: TLS).
As first reported by the Australian Financial Review (AFR), there are rumours that the Singaporean telco giant Singapore Telecommunications (Singtel) is considering offloading Optus. Optus is an Australian telco brand, but is wholly owned by Singtel.
The initial AFR report claimed that "Singtel is Singtel is in advanced discussions to sell Optus, Australia's second-largest telecommunications group, to Toronto-headquartered private equity giant Brookfield in what would be a blockbuster deal worth some $16 billion".
Following the release of this report, Singtel has attempted to pour a little cold water over these rumours. In an official stock market release, the Singapore telco stated the following:
There is no impending deal to offload Optus for the said sum, as reported [by the AFR]. Optus remains an integral and strategic part of the Singtel Group and we are committed to Australia for the long term…
Our current focus has been on improving network resilience and conducting a CEO search. That said, we regularly conduct strategic reviews of our portfolio to optimise the value of our assets and businesses and will explore all options to maximise shareholder value.
So no sale, at least for now (note that the company did leave the metaphorical door open a crack).
But what would a sale of Optus mean for other ASX telco shares like Telstra?
How would an Optus sale impact Telstra shares?
Well, it's difficult to say.
For one, any potential buyer would need to satisfy regulators and the like.
But let's assume they do. If Singtel did eventually offload Optus, what happens next will probably depend on the buyer.
If whoever buys Optus decides to invest a significant chunk of change towards expanding Optus' mobile network, or towards increasing its market share by reducing prices, it could well have a massive impact on other telcos like Telstra.
Fierce competition in this space has occurred before and has resulted in lower profits across the board. If any new Optus owner decided to dramatically undercut Telstra and other telcos like TPG Telecom Ltd (ASX: TPG), we could see this happen again.
However, as a Telstra shareholder myself, I'm not too worried. Since its privatisation in the 1990s, Telstra has easily maintained its dominant role as the number one player in the Australian telco space. Its mobile network is simply far superior to that of any competitors.
Even if a new Optus owner threw money at expanding Optus' network, I doubt whether it could overcome Telstra's dominance, at least in the foreseeable future.
Optus is also struggling with its brand in the wake of the severe outage crisis we saw late last year. This resulted in the then-Optus CEO Kelly Bayer Rosmarin's resignation.
In 2022, Optus also took a hit to its reputation thanks to a major cyberattack.
I think the damage to Optus' reputation from these crises will take a long time for any new buyer to fix.
So all in all, as a Telstra shareholder, I'm not worried about any potential new owners of Optus. But it will be interesting to see if Optus does indeed depart from the Singtel stable, and what plans any new owner might have for the telco.
