MobileOne Pty (M1), the second largest mobile operator in Singapore, expects to raise SGD 790m ($447m) from its initial public offering, after luring investors with a generous dividend in order to counter difficult market conditions and general wariness of telecom stocks.
M1 will sell 600.5 million shares, or at least 57.2% of its enlarged share capital of 1.05 billion shares. Shares are priced at $1.32 each for institutional investors, although a small number of individual investors will be discounted at $1.25.
Unlike the weak response to China Telecom’s recent IPO, which had to be scaled back due to lack of interest, investment bankers are reporting that take-up by institutional investors of M1 stock has been positive, with the institutional tranche of 600 million shares twice over-subscribed.
Yet some analysts are putting this strong demand down to the generous dividend of up to 6 cents a share this year, and a similar amount next year, as there remains some concern about the possibility of future (revenue) growth. Last year M1 posted net income of $100.5m on revenue of $639.1m.
Singapore has a high penetration of mobile use, and 75% of the population is estimated to own a mobile phone. This has led to investor concern about M1’s ability to expand in this market. M1 has just over a million subscribers in Singapore, and has been holding a static 33% market share, behind Singapore Telecommunications Ltd, with a 49% market share. StarHub, the third largest player, has 18%.
The IPO will open Wednesday and close on December 2, with shares due to begin trading on December 4 on the Singapore Exchange. All of M1’s shareholders (Singapore Press Holdings Ltd, Keppel Telecommunications & Transportation Ltd, Cable & Wireless Plc, and PCCW Ltd) are selling a portion of their stock.
Cable & Wireless will reduce its 15% stake in M1 to roughly 5%, as part of its strategic disposal of non-core assets. The troubled UK-based telecom operator hopes to receive between $134m and $154.5m for its stake.