Tuas Ltd (ASX: TUA) shares are having a day to forget on Monday.
In morning trade, the ASX 200 telco share is down a massive 69% to a two-year low of $1.91.
This has knocked more than A$2 billion off the Singapore-based mobile and broadband operator's market capitalisation.
Image source: Getty Images
What is Tuas?
As mentioned above, Tuas is a Singapore-based telco, chaired by former TPG Telecom Ltd (ASX: TPG) CEO and founder David Teoh.
In March, the company released its half-year results and revealed a 25.5% increase in revenue to S$91.9 million. Things were even better for its earnings, with EBITDA rising 27% to S$42.1 million, and net profit after tax increasing over 500% to S$18.7 million.
The key driver of this growth was its SIMBA mobile business, which has recorded strong subscriber growth in broadband services and mobile services.
However, the shock news today is that Tuas' SIMBA business has allegedly been using spectrum that it doesn't own.
As a result, the Infocomm Media Development Authority of Singapore (IMDA) has suspended its review of Tuas' proposed acquisition of M1 Limited.
M1 acquisition
Last year, Tuas raised A$435 million from institutional and retail investors to partly fund the acquisition of M1 Limited.
It believed that the deal would create a stronger, more competitive telco in Singapore by combining SIMBA's fast-growing digital consumer business with M1's established network and enterprise capabilities, enabling greater scale, efficiency, and innovation.
The two parties agreed on a deal valued at S$1,430 million on a debt-free and cash-free basis.
However, there appear to be concerns that this deal could now be on the rocks following this news.
In a release this morning, Tuas stated:
The circumstance identified by the IMDA as giving rise to its decision to suspend the review is that it had learned that Simba may have been using radio frequency bands that it was not authorised to use, which would be a breach of the Telecommunications Act and the conditions of Simba's Facilities-Based Operations Licence. Simba is fully co-operating with the IMDA. The Board of Tuas will also be reviewing the circumstances concerning the alleged unauthorised use of spectrum.
Speaking about the share purchase agreement, the company added:
Tuas notes that the Share Purchase Agreement for the Transaction has a long-stop date of 21 May 2026. At this time, discussions with the counterparties to the Share Purchase Agreement are ongoing. Tuas will keep the market advised as developments occur.
It also remains to be seen if there will be penalties imposed on Tuas if it is found to have breached the Telecommunications Act in Singapore.
