NetLink NBN Trust’s IPO: A Brief Walk Through History
Singapore Telecommunication Limited’s (SGX: Z74) associate, NetLink Trust, has filed its preliminary prospectus to list on the Singapore stock exchange as NetLink NBN Trust.
NetLink Trust is a business trust that was established under IMDA’s (Info-communications Media Development Authority of Singapore) effective open access requirements for Singapore’s NextGen NBN initiative. Singtel’s stake in NetLink Trust can be considered to be unconventional. The unusual arrangement and the trust’s IPO can be traced back its history.
With that in mind, let’s take a quick look at the trust’s history.
A long, long time ago …
The history of NetLink NBN Trust can be traced back to a consortium called OpenNet.
OpenNet was owned by Singtel, Axia NetMedia Corporation, Singapore Press Holdings (SGX: T39), and SP Telecommunications. Singtel and Axia had a 30% stake each while SPH had a 25% stake. The remaining 15% was with SP Telecommunications.
In late 2008, OpenNet was designated as the “Network Company” after winning a competitive tender to design, build and maintain passive infrastructure in Singapore. In conjunction with the tender, Singtel committed to transfer infrastructure such as manholes, ducts and exchange buildings to OpenNet. Allen Lew, who was Singtel’s CEO Singapore back then, said:
“… passive network assets like ducts and manholes will no longer be a telco’s competitive advantage as every service provider has equal access to the infrastructure.”
With that, OpenNet would be tasked in building a ultra-high-speed broadband network that would connect all physical addresses in Singapore and its connecting islands.
This valuable access will be sold to service providers and telcos.
Along came Netlink Trust (and controversy!)
In 2011, NetLink Trust was established. Singtel had full ownership of NetLink Trust and transferred its underground ducts, manholes and central offices into the trust. These infrastructure assets were used to support OpenNet’s fiber network deployment.
But it was a strategic move in 2013 that had Singtel’s rivals up in arms.
In 2013, NetLink Trust proposed to acquire OpenNet (through its trustee CityNet). Seven opposing companies, including Singtel’s rivals M1 Ltd (SGX: B2F) and StarHub Ltd (SGX: CC3), released a strongly worded statement against the acquisition. The group said:
“We must respectfully dismiss any suggestion that CityNet will be a ‘neutral’ or ‘independent’ entity that will serve the best interests of the industry. On the contrary, under the Act, CityNet is obliged to put SingTel’s interests ahead of its own.”
In its defense, CityNet said:
“There are safeguards in place to prevent SingTel from having control over NetLink Trust. CityNet’s independence is also preserved by a majority-independent board and a professional management team.”
Singtel also added its voice, saying:
“NetLink Trust and CityNet operate within a strict regulatory framework that ensures open access to the Next Gen NBN fibre network and regulated pricing to all industry operators.”
Ultimately, the Infocomm Development Authority of Singapore (IDA) approved the deal, but it came with caveats to address concerns raised by Singtel’s competitors.
For one, Singtel will relinquish its role as OpenNet’s key subcontractor and transfer all relevant personnel into OpenNet. NetLink Trust will also receive all assets under OpenNet. Most crucially, Singtel is also mandated to divest more than 75% of its holdings by April 2018.
And that brings us to the present day with the NetLink Trust IPO.
As you can see, the roots of NetLink Trust’s IPO can be traced back to OpenNet and the controversy behind NetLink Trust’s acquisition of OpenNet. In the trust’s preliminary IPO filing, Singtel indicated that it will be maintaining a 24.99% stake in NetLink NBN Trust after the IPO.