THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION. THIS DOCUMENT IS THE BIDDERS STATEMENT (INCLUDING THE OFFER) WHICH HAS BEEN PREPARED BY SINGTEL AUSTRALIA INVESTMENT LTD. IF YOU ARE IN ANY DOUBT AS TO HOW TO DEAL WITH THIS DOCUMENT PLEASE CONSULT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
Table of Contents BIDDERS STATEMENT Letter from the SingTel Chairman 1 EXECUTIVE SUMMARY 1.1 1.2 1.3 1.4 1.5 1.6 1.7 2 Background to the Offer for your Optus Shares SingTel SingTels rationale for the acquisition of Optus The benefits of SingTel acquiring Optus The effect on SingTel of acquiring Optus Acceptance considerations for Optus Shareholders Definitions and glossary 7 8 8 8 9 9 9 9 11 12 16 19 20 22 25 26 28 30 35 40 43 44 44 47 47 48 56 56
OVERVIEW OF THE OFFER 2.1 2.2 Overview of the Offer Implied A$ value of the three Offer Consideration alternatives
SINGTEL AND ITS STRATEGY 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16 History and overview SingTels goal and strategies Singapore telecommunications industry SingTels competitive environment Business and support units Principal business activities Infrastructure and technology International strategic investments Employees Property SingTel Board and senior management Capitalisation and indebtedness Summary historical financial information Management discussion and analysis of financial results and position Dividend history SingTel Share price history
THE ACQUISITION OF OPTUS 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 Rationale for SingTels acquisition of Optus Profile of SingTel after acquisition of Optus The benefits of acquiring Optus SingTels intentions in relation to the Optus business Prospects for SingTel Unaudited Pro-forma Consolidated Financial Information Notes to the Pro-forma Consolidated Financial Information Significant differences between Singapore GAAP and Australian GAAP, and between SingTels and Optus accounting policies Report from PricewaterhouseCoopers on the unaudited Pro-forma Consolidated Financial Information
57 58 58 59 63 66 68 79 80 84 87 88 88 88 89 89 89 90 90 90 91 92 92 92 92 92 93 93 94 94 94 95 95 96 97
ACCEPTANCE CONSIDERATIONS FOR OPTUS SHAREHOLDERS 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 Summary of Acceptance Considerations SingTels commitment as Optus new key strategic shareholder Benefits of becoming a SingTel Shareholder Liquidity of SingTel Shares Risks of becoming a SingTel Shareholder or holding SingTel Bonds Implications of not accepting the Offer Individual preferences and circumstances of Optus Shareholders Taxation implications for Optus Shareholders Rights of SingTel Shareholders
RISK FACTORS 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 Overview Changes in economic conditions Changes in political conditions Changes in regulatory environment Competitive environment Risks associated with SingTels regional expansion strategy Changes in technology Project risks Perceived risks associated with electromagnetic energy Control of SingTel Changes in exchange rates Market for and liquidity of SingTel Shares Risks associated with the SingTel Bonds Different shareholder rights
TAXATION 7.1 7.2 Australian tax implications for Optus Shareholders Singapore taxation considerations
99 100 109 115 116 116 116 123 123 124 124 127 128 128 129 129 130 131 131 132 134 134 136 138 140 141 141 143 144
INFORMATION ON SINGTEL SHARES 8.1 8.2 8.3 8.4 8.5 8.6 8.7 Share capital of SingTel Recognition of other exchanges Rights attaching to and regulations affecting SingTel Shares Temaseks role as majority shareholder SingTel employee incentive plans Substantial shareholders of SingTel Trading arrangements for SingTel Shares
THE OFFER 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 9.10 9.11 9.12 9.13 9.14 9.15 The Offer Consideration SingTel Shares SingTel Bonds Unsecured Notes Alternative disposal mechanisms Buy-Back Alternative How to accept this Offer Offer Period Your agreement resulting from acceptance Provision of Offer Consideration Conditions Offerees Variation and withdrawal Governing Law
11 OTHER INFORMATION 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 Identity of bidder Cash consideration Contracts with C&W plc and Optus Directors interests and corporate governance Benefits to certain persons Compulsory Acquisition Litigation of SingTel Interruptions in SingTels business Material changes in financial position of SingTel and Optus
149 150 150 152 156 158 159 159 160 160 160 161 163 163 164 164 165 165 165 166 166 167 168 173 175 176
11.10 Regulatory and other approvals 11.11 ASIC modifications and exemptions 11.12 ASX Information Memorandum 11.13 ASX waivers 11.14 SingTels relevant interests and voting power in Optus 11.15 Dealings in Optus Shares 11.16 Other benefits in relation to bid securities 11.17 Other information about SingTel 11.18 Other information about Optus 11.19 Consents and liability 11.20 Miscellaneous 12 DEFINITIONS AND INTERPRETATION 12.1 12.2 12.3 12.4 Definitions Glossary SingTel subsidiaries, Associated Companies, projects and services Interpretation
ANNEXURES 1 2 3 4 5 6 Consolidated financial statements Implementation Agreement Terms and conditions of the SingTel Bonds Telecommunications, postal and broadcasting regulation in Singapore Material SingTel information releases Material Optus information releases 177 223 239 251 261 265
IMPORTANT INFORMATION
Indicative timetable Date of this Bidders Statement Offer Period commences SingTel Shareholders meeting Offer Period ends, unless extended This timetable is indicative only and may change. Currencies SingTels consolidated financial information and other financial information about SingTel are presented in S$. For convenience of reference only: the S$ mid-rate for A$, as shown on Reuters, was S$0.9262/A$1 on 30 April 2001 (at approximately 5.40 pm Singapore time); and the US$ mid-rate for A$, as shown on Reuters, was US$0.5095/A$1 on 30 April 2001 (at approximately 5.40 pm Singapore time). 18 May 2001 23 May 2001 29 May 2001 3 July 2001 at 7.00 pm (Sydney time).
Optus Shareholders should be aware that the exchange rate determined in connection with the Offer Consideration is US$0.4940/A$1, being the Announcement Exchange Rate. Exchange rate movements may affect the value and/or the price of, and income from, SingTel Shares and, where relevant, SingTel Bonds. Information about this Bidders Statement This document is the Bidders Statement issued by SingTel Australia. It is dated 18 May 2001 and includes an Offer dated 23 May 2001. Section 9 sets out the terms of the Offer. A copy of this Bidders Statement has been lodged with the Australian Securities and Investments Commission on 18 May 2001. ASIC takes no responsibility for the contents of this Bidders Statement. Section 12 contains definitions and a glossary of certain words and expressions used in this Bidders Statement. Sources of information Information included in this Bidders Statement relating to Optus and its business has been derived solely from publicly available sources published by Optus, including Optus 1999 and 2000 Annual Reports to Optus Shareholders, and from material made available to SingTel during the course of the limited due diligence which Optus allowed SingTel to conduct in connection with the negotiation of the Implementation Agreement. Optus is an Australian company listed on the ASX and subject to the continuous and periodic reporting obligations imposed by the ASX Listing Rules and the Corporations Law. The financial information relating to Optus in Sections 4.6 to 4.9, the summary financial information relating to Optus derived from that financial information contained elsewhere in this Bidders Statement and the particulars of Optus issued share capital and Optus Options, have been furnished by Optus for inclusion in this Bidders Statement. SingTel, SingTel Australia and their respective directors are not aware of any errors in such information. Subject to the foregoing and to the maximum extent permitted by law, SingTel, SingTel Australia and their respective directors disclaim all liability for information concerning Optus included in this Bidders Statement. Optus Shareholders should form their own views concerning Optus from publicly available information. In particular, Optus Shareholders should carefully consider the contents of the Targets Statement issued by Optus in response to this Bidders Statement. Information included in this Bidders Statement relating to Temasek and the Government of Singapore has been derived solely from publicly available sources. US selling restriction The SingTel Securities have not been registered under the Securities Act 1933 of the United States of America and may not be offered or sold in the United States or to US persons (other than distributors) unless the securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. Important notice to United Kingdom shareholders Morgan Stanley & Co. Limited is regulated in the United Kingdom by The Securities and Futures Authority Limited. This document has been issued by SingTel Australia Investment Ltd. and its contents have been approved by Morgan Stanley & Co. Limited solely for issue in the United Kingdom for the purposes of section 57 of the Financial Services Act 1986. Morgan Stanley & Co. Limited has not approved the contents of this document for the purposes of distribution into any jurisdiction outside the United Kingdom. Morgan Stanley Dean Witter Asia (Singapore) Pte and Morgan Stanley & Co. Limited are acting for SingTel Australia Investment Ltd. and no-one else in connection with the Offer and will not be responsible to anyone other than SingTel Australia Investment Ltd. for providing the protections afforded to customers of Morgan Stanley Dean Witter Asia (Singapore) Pte and Morgan Stanley & Co. Limited nor for providing advice in relation to the Offer. Morgan Stanley & Co. Limited, its associates and/or its or their directors, officers and employees may have or have had interests or long or short positions in, and may at any time make purchases and/or sales as principal or agent, or may act or have acted as market-maker in the relevant securities or related financial instruments discussed in this document. Furthermore, Morgan Stanley & Co. Limited and its associates may have or have had a relationship with or may provide or have provided corporate finance, capital markets and/or other services to the relevant companies. Employees of Morgan Stanley & Co. Limited and its associates may serve or have served as officers or directors of the relevant companies.
18 May 2001
Singapore Telecommunications Limited 31 Exeter Road, Comcentre, Singapore 239732 Republic of Singapore Tel: +65 838 3388 Fax: +65 732 8428 Email: contact@singtel.com Website: www.singtel.com
Dear Optus Shareholder It is with great pleasure that SingTel, through SingTel Australia, makes this Offer to acquire your Optus Shares. Detailed terms of the Offer and further information regarding SingTel, its intentions for Optus and the profile of SingTel after the acquisition are contained within this Bidders Statement. You should read this Bidders Statement and the Targets Statement from Optus carefully before making any decision regarding your Optus Shares. SingTels goal is to become the leading integrated communications service provider in the Asia Pacific region. It is already the leading integrated communications service provider in Singapore and has a significant presence in key markets around the Asia Pacific region, such as India, the Philippines and Thailand. Together with its partners, SingTel is also proud to have been granted a licence as one of the new entrants to provide basic telecommunications services in Taiwan. SingTel is the largest company listed on the Singapore Stock Exchange with a market capitalisation of S$28.1 billion as at 30 April 2001. For the year ended 31 March 2001, SingTels total operating revenue exceeded S$4.9 billion with profit after tax before extraordinary items of S$2.3 billion. SingTel, on the basis of its pro-forma market capitalisation as at 30 April 2001 following the acquisition of Optus, will be the seventh largest company listed on the Australian Stock Exchange and one of the five largest listed communications companies in the Asia Pacific region (excluding Japan). SingTel Australia is offering you a choice of three consideration alternatives: (i) SingTel Shares, (ii) a combination of SingTel Shares and cash, or (iii) a combination of SingTel Shares, cash and SingTel Bonds. The SingTel Board believes this choice provides Optus Shareholders with the flexibility to choose the consideration that most suits their individual circumstances. The SingTel Board believes that the SingTel Shares offered to you represent an attractive investment and will enable you to participate in a leading Asia Pacific integrated communications service provider. SingTel is seeking to be listed on the Australian Stock Exchange, in addition to its existing listing on the Singapore Stock Exchange. Following the acquisition of Optus, SingTel believes it will have a compelling strategic position in the communications industry in the Asia Pacific region and that benefits will accrue to both SingTel and Optus. If SingTels Offer is successful, SingTel will: have one of the Asia Pacific regions most extensive multiple market cellular operations, with a total subscriber base close to 11 million subscribers across five markets; have one of the most extensive and advanced data communications networks in the Asia Pacific region, consisting of submarine, satellite and domestic backhaul networks covering key markets in the region and providing global connectivity; have more diverse, stable revenue streams, with attractive growth prospects; be of a greater size and scale than the stand-alone SingTel and Optus groups with potential to continue expansion; and remain financially strong with the flexibility to continue to fund the future growth of its businesses. I look forward to welcoming you as a SingTel Shareholder. Yours faithfully
SECTION 1
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
1.2 SINGTEL
SingTel is the leading provider in Singapore of international and local telephone services, mobile communications services, data communications services and postal services. SingTel is also one of the leading integrated communications service providers in the Asia Pacific region. It has 19 offices in 14 countries around the world, extensive networks throughout the Asia Pacific region and significant investments outside Singapore, particularly in Belgium, India, the Philippines, Taiwan and Thailand. SingTel has a strong track record of adding value to its international investments and supporting their growth. As at 30 April 2001, SingTels market capitalisation was S$28.1 billion, making it the largest company listed on the SGX-ST. Further information about SingTel is set out in Section 3. Financial information concerning SingTel is included in Annexure 1.
EXECUTIVE SUMMARY
10
SECTION 2
OVERVIEW OF THE OFFER
11
12
13
Offer Conditions
14
SingTel Australia may declare the Offer free of any of these conditions (other than the Minimum Acceptance Condition and Australian Foreign Investment Review Board approval) in accordance with the Offer. The status as at 15 May 2001 of a number of these conditions is outlined in Section 11.10. Eligibility The Offer will extend to all persons registered as holders of Optus Shares on 19 May 2001 (the Register Date). The Offer will also extend to: (a) Optus Shares that are issued during the period from the Register Date to the end of the Offer Period as a result of the conversion of, or exercise of rights attached to, Optus Options on issue on the Register Date; and (b) Optus Shares that are issued to participants in Optus Employee Share Plans during the period from the Register Date to the end of the Offer Period in accordance with an announcement made by Optus before 25 March 2001 or under the Q1 2001 Plan or the Q2 2001 Plan where SingTel Australia has given its consent to the issue before the Instrument Date. Entitlement to SingTel dividends If you accept the Offer and are registered as a SingTel Shareholder on the Dividend Record Date, you will be entitled to receive SingTels final dividend for the year ended 31 March 2001. Your SingTel Shares will rank equally with all other SingTel Shares for future dividends. Any entitlement to receive a fraction of a SingTel Share or a SingTel Bond (except as mentioned below) will be rounded up to the nearest whole number. Any entitlement to receive less than a whole number of US$1 face value of a SingTel Bond on redemption of an Unsecured Note will be rounded down to the nearest whole number of US$1. If SingTel reasonably believes that a shareholders holdings have been manipulated to take advantage of the rounding up provisions then any traditional entitlement may be rounded downwards. Listing of SingTel Shares SingTel will seek listing of all SingTel Shares, other than those held by Temasek, on the ASX. Listing is subject to satisfaction or waiver of all Offer conditions and to compliance with the requirements of the ASX. SingTel has obtained the in-principle approval of the SGX-ST for the listing and quotation of all new SingTel Shares to be issued pursuant to acceptance of the Offer. Such approval should not be taken as an indication of the merits of acceptance of the Offer, nor of the merits of SingTel Shares or Optus Shares. As a result, all SingTel Shares, including those held by Temasek, will be listed on the SGX-ST.
15
16
1.50 1.55 1.60 1.65 1.70 1.75 1.80 1.85 1.90 1.95 2.00 2.05 2.10 2.15 2.20 2.25 2.30 2.35 2.40 2.45 2.50
2.69 2.78 2.87 2.96 3.05 3.14 3.23 3.32 3.41 3.49 3.58 3.67 3.76 3.85 3.94 4.03 4.12 4.21 4.30 4.39 4.48
3.55 3.59 3.63 3.68 3.72 3.76 3.80 3.85 3.89 3.93 3.98 4.02 4.06 4.11 4.15 4.19 4.24 4.28 4.32 4.37 4.41
3.31 3.34 3.37 3.40 3.43 3.46 3.49 3.52 3.54 3.57 3.60 3.63 3.66 3.69 3.72 3.75 3.78 3.81 3.84 3.87 3.89
Notes (1) The price and value of shares and the income derived from them may fall as well as rise. Past performance is not necessarily a guide to future performance. Exchange rate movements may affect the value to shareholders of shares or income denominated in S$ and bonds denominated in US$. (2) Calculated based on an exchange rate of S$0.9262/A$1, as at 30 April 2001. (3) Assumes Optus Shareholders elect to receive the cash component of the Offer Consideration in A$. (4) Assumes Optus Shareholders receive SingTel Bonds based on the Announcement Exchange Rate of US$0.4940/A$1. The A$ value of the SingTel Bonds has been calculated based on an exchange rate of US$0.5095/A$1, as at 30 April 2001. (5) Assumes Optus Shareholders do not receive additional cash and SingTel Bonds in lieu of SingTel Shares.
17
18
SECTION 3
SINGTEL AND ITS STRATEGY
19
S I N G T E L A N D I T S S T R AT E G Y
SingTel has made many strategic investments outside Singapore, including in Belgium, Hong Kong, India, Indonesia, the Philippines, Taiwan and Thailand. Details of some of these international investments appear in Section 3.8. Since its initial public offering and listing in 1993, SingTel has grown its business in spite of increasing competition. In the last few years, growth has been driven primarily by mobile communications, public data and private networks, and IT and engineering services.
SingTel Five Year Revenue Performance Year Ended 31 March 4,942 4,925
4,884
4,866
S$ million
4,421
1997
1998
1999
2000
2001
20
S I N G T E L A N D I T S S T R AT E G Y
SingTel Five Year EBITDA Performance Year Ended 31 March
1999
2000
2001
SingTel Five Year Profit after Tax before Extraordinary Items Performance Year Ended 31 March 2,324
S$ million
For the year ended 31 March 2001 SingTels total operating revenue was S$4.9 billion, with a profit after tax before extraordinary items of S$2.3 billion. As at 31 March 2001 its total assets were S$16.2 billion. As at 30 April 2001 SingTels market capitalisation was S$28.1 billion, making it the largest listed company in Singapore and one of the five largest listed communications companies in the Asia Pacific region (excluding Japan). SingTels operating revenue does not include operating revenue from its Associated Companies. If SingTels proportionate share of operating revenue from its Associated Companies outside Singapore were included in operating revenue, SingTels consolidated operating revenue for the year ended 31 March 2001 would increase to S$6.9 billion from S$6.2 billion for the year ended 31 March 1999. The proportionate share of operating revenue of SingTels Associated Companies outside Singapore would have constituted 28.5% of this consolidated operating revenue for the year ended 31 March 2001.
21
S I N G T E L A N D I T S S T R AT E G Y
SingTel Revenue Composition Year Ended 31 March 1999
Other 7% Postal Services 6% IT and Engineering Services 7%
As the above charts illustrate, SingTels traditional dependence on international telephone services is rapidly reducing, reflecting the diversification of its revenue streams across a wider range of communications services.
(b) SingTels strategies (i) Customer-focused service offerings SingTel is focused on the needs of the communications market. It is aware that new customer groups are emerging as a result of rapid changes in technology, lifestyle and economic and regulatory environments. For example, new cellular subscribers are increasingly from younger social groups and there is growing demand for wholesale communications services from other service providers as communications markets liberalise and new technologies and products emerge. In recognition of these developments, SingTel has embarked on several initiatives, as described in Section 3.4(b).
22
S I N G T E L A N D I T S S T R AT E G Y
(ii) World-class infrastructure Network infrastructure SingTels network investment strategy is to ensure that its networks remain modern, efficient and capable of handling the requirements of its customers. It has made substantial investments in fixed line and mobile networks in Singapore and in expanding its connectivity to the rest of the world, with particular focus on the Asia Pacific region. Ownership of an integrated network infrastructure enables SingTel to control the quality and availability of its services. In its network planning, SingTel aims to provide a diverse and resilient network that ensures the quality and availability of its services with minimal service disruptions. Further details of SingTels network infrastructure are set out in Section 3.7. Service infrastructure SingTel places strong emphasis on customer service. Improvement in customer satisfaction levels is an important part of performance targets for staff. SingTel conducts customer satisfaction surveys regularly. The results are compared with benchmarks, areas requiring improvement are analysed and solutions are developed for implementation. Front line services, such as call centres, service provision and maintenance are provided by a centralised Customer Service Group. This ensures that sufficient focus is given to maintaining high customer service levels. SingTel aims to provide its corporate and retail customers with access to a high quality service infrastructure. For this purpose, SingTel has established offices in overseas locations that enable it to support the requirements of multinational corporations and other overseas customers. It has established points of presence in 19 cities in 14 countries around the globe. SingTel operates retail and customer service outlets, including Teleshops, the hello! retail store in the heart of the Singapore shopping district, Internet caf facilities, SingPost outlets and other service channels. These make up a comprehensive distribution network for SingTels services. Access to technology developments SingTel seeks to be at the forefront of technology developments. It has good relationships with major suppliers, with whom it collaborates in testing new products. SingTel also operates a venture capital fund with a view to gaining early access to new technologies and products. Technologies developed by Commerce One and InterTrust, two of SingTels venture capital investments, have already been deployed by SingTel or its Associated Companies. (iii) Expansion into other markets SingTels international investment activities are an important part of SingTels growth strategy. These investment activities also have the effect of diversifying SingTels business and operating risks. SingTels key investment criteria are as follows. The investment should provide attractive growth potential. Typically, this means that SingTels investments will be: in markets where communications penetration rates are relatively low, such as developing economies; in larger markets such as Australia, China, India and Korea; and/or in companies whose principal operations are in SingTels targeted growth platforms, such as mobile communications and data communications. The investment should provide SingTel with a meaningful equity interest, enabling it to participate in strategic decisions and to contribute to enhancing the value of its investment, including through sharing of skills and knowledge.
23
S I N G T E L A N D I T S S T R AT E G Y
The table below provides some details of SingTels key international investments. Further details of these investments appear in Section 3.8.
S I N G T E L S EFFECTIVE EQUITY INTEREST
INVESTMENT
C O U N T RY
P R I N C I PA L B U S I N E S S
21.0%
Thailand
Mobile Paging Mobile National telephone International telephone Data communications Mobile National telephone Internet National telephone International telephone Data communications Mobile (MVNO) Satellite services Mobile National telephone Mobile National telephone International telephone Data communications
23.6%(1) Philippines
Bharti Group
28.5%(2) India
NCIC
24.3%
Taiwan
50%(3) Singapore and other Asian markets (excluding Japan) 20.35% 14.3% 40.0% 12.15% Hong Kong Thailand Indonesia Belgium
(1) SingTels effective equity interest in the enlarged Globe Telecom, after its acquisition of Isla Communications Co., Inc. (as described in Section 3.8(b)), is estimated to be 23.6%. The actual percentage will be determined only after the legal completion of the acquisition. (2) SingTels shareholdings in the Bharti Group consist of direct equity interests in two companies in the Bharti Group, namely Bharti Telecom Limited and Bharti Tele-Ventures Limited, as described in Section 3.8(c). (3) SingTels 50% effective equity interest in Virgin Mobile Asia will be achieved after the completion of its agreed capital injection.
There are also a number of smaller international investments that SingTel has made to capture the growth potential of relevant markets outside Singapore. SingTel is committed to adding value to its international investments. It does this through both non-financial and financial contributions, as well as by provision of assistance on specific projects. For example: SingTel has seconded a number of its experienced managers and professionals to assist its Associated Companies to manage their businesses and to provide know-how and support in areas such as engineering, information technology, interconnection, carrier services, sales and marketing; Through its representation on the boards of its Associated Companies, SingTel shares its experience and expertise in operating fixed line, mobile, and other types of communications businesses; and SingTel has provided assistance in a number of Associated Companies network projects including network frequency planning, capacity expansion to improve network quality, installation of base stations, as well as in the selection of suppliers.
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S I N G T E L A N D I T S S T R AT E G Y
25
S I N G T E L A N D I T S S T R AT E G Y
26
S I N G T E L A N D I T S S T R AT E G Y
(b) SingTels competitiveness SingTel has competed vigorously to maintain its leading position in all key market segments. It has focused on identifying and meeting the communications needs of each market segment by enhancing the range, quality and value of its products and services, while at the same time ensuring that its products and services are competitively priced. Some of SingTels recent initiatives are outlined below: SingTel has organised its businesses into a number of customer focused business units. This enables SingTel to focus more clearly on the communications needs of different customer segments. Further details of the activities of SingTels principal business units are set out in Section 3.5; to address current and expected customer demands, SingTel has continued to invest in the mobile and data communications service platforms; SingTel has introduced competitive services and pricing plans to address the varied needs of its customers relating to service quality and price. These products and pricing plans include IDD Call (001), BudgetCall 013, v019, FaxPlus 012, FaxPlus Connect, World Conference and eVoiz (for Internet-savvy customers); SingTel has refined its market segmentation strategies to identify and meet the needs of SingTels different customers. For example, in April 2000, SingTel introduced a new brand, pod, that targets the youth segment in Singapores cellular market; SingTel has entered into a joint venture with the Virgin Group to resell cellular services under a new Virgin Mobile brand that targets the market attracted to the Virgin brand; and SingTel has launched customer loyalty programs and innovative promotion packages aimed at retaining existing customers and attracting new ones.
SingTel believes it has a number of competitive strengths that enable it to compete effectively against other communications service providers in Singapore and in the Asia Pacific region, including the following: SingTels network infrastructure is of high quality and has extensive reach. SingTel has the largest number of mobile base stations, the majority of public telephone lines and the most extensive connectivity between Singapore and other countries, utilising a variety of technologies, including copper, DSL, microwave, fibre optic, submarine cable and satellite; its ownership of network infrastructure enables SingTel to control the quality and availability of its services and maintain a low cost base that allows it to competitively price its services; economies of scale provide SingTel with significant cost advantages, for example in the procurement of network equipment; as an integrated communications service provider, SingTel is able to provide its customers with a comprehensive range of services, including cross-border services to multinational corporations that can be supported by SingTel offices around the world; and SingTels local and regional partnerships with other companies, such as AIS, Globe Telecom, Bharti Group, and NCIC, as well as its new venture with the Virgin Group, provide further bargaining power with suppliers, expanded geographical reach and the ability to provide seamless services to customers.
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S I N G T E L A N D I T S S T R AT E G Y
International Telephone Mobile Data National Telephone IT & Engineering Equipment Sales
Data
IT & Engineering
A brief description of SingTels business and support units is set out below. (a) Principal business units (i) Corporate Business Unit The target segments of the Corporate Business Unit are multinational corporations, large corporations and government enterprises, and small and medium enterprises, within and outside Singapore. In Singapore, SingTel offers a full range of corporate voice, data and IT solutions and is focused on implementing and delivering such services wherever its customers are. Its services include national and international voice and data services (including leased lines, frame relay, ATM, IP and ISDN), managed data networks, Internet exchange, facilities management/data centres, network/system integration and outsourcing and equipment sales. The Corporate Business Unit also supplies wholesale communications services and network access to other communications service providers in Singapore. SingTel also offers some of these services to customers outside Singapore, where regulations permit it to do so. (ii) Consumer Business Unit The Consumer Business Unit focuses on residential fixed line customers and mobile communications customers in Singapore. Its services include national and international voice and facsimile services, mobile communications, paging, Internet access, and equipment sales. The Consumer Business Unit also sells broadband capacity to ISPs in Singapore. SingTel has Singapores most extensive retail distribution network for communications services and equipment sales, comprising a large number of dealer outlets and 15 owned retail outlets. The Consumer Business Unit is responsible for managing SingTels owned retail outlets and its dealer relationships.
28
S I N G T E L A N D I T S S T R AT E G Y
(iii) Global Business Unit The Global Business Unit manages SingTels global business of offering wholesale communications services over satellite, submarine cable, microwave, global voice networks and other international networks. The Global Business Unit focuses on providing capacity on a wholesale level to other global communications service providers and other corporate buyers of international network capacity. The Global Business Unit also provides global wholesale voice delivery services to other telecommunications carriers by leveraging on SingTels strategic points of presence and extensive international infrastructure. The Global Business Unit aims to establish SingTel as a leading regional hub service provider in the Asia Pacific region. The Global Business Unit is responsible for the development and maintenance of SingTels international network infrastructure, including satellites, submarine cables and microwave. (b) Growth and specialised business units (i) Multimedia Business Unit The Multimedia Business Unit manages SingTels narrowband and broadband Internet businesses in Singapore, providing access and value-added services such as hosting, co-location, managed services, security and firewalls. SingTels Magix broadband interactive multimedia service is marketed through this business unit. This business unit also oversees SingTels regional investments in ISPs such as PointAsia Dot Com (Thailand) Limited in Thailand and Infoserve Technology Corporation in Taiwan. (ii) IT and Engineering Services The IT and engineering services business is conducted primarily by NCS and Aeradio. NCS provides total IT solutions including e-business and IT consulting, business applications development and maintenance, systems and secured network integration, IT infrastructure integration, and facilities maintenance and outsourcing. NCS is also a licensed SBO for resale of various value-added telecommunications services. This licence enables NCS to provide managed network and infrastructure integration, and operations services (such as ATM, frame relay, leased lines, LAN, WAN, and broadband network implementation). Aeradio focuses on hardware and systems integration, including those in relation to airport facilities maintenance and telecommunications transmission networks. (iii) Postal and delivery services SingPost undertakes postal and delivery services such as domestic mail, international mail, express mail and parcel services. (iv) Directory publishing and advertising services SingTel Yellow Pages produces the Singapore Phone Book and Yellow Pages in print, Internet, WAP and telephone operator-assisted form. (c) Functional Support Units (i) Network The Network Support Unit manages the development and maintenance of SingTels national fixed line and mobile communications networks. (ii) Customer Service The Customer Service Support Unit handles SingTels interactions with its retail customers on service-related matters. (iii) Strategic Investments SingTel International supports the growth objectives of SingTels business units through strategic investments across the region. SingTel Ventures makes investments in early-stage technology companies. (iv) Others SingTel has a number of other support functions, including Corporate Affairs, Corporate Marketing and Communications, Finance, Human Resources and Information Systems.
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S I N G T E L A N D I T S S T R AT E G Y
IDD Average Net Collection Rate Year Ended 31 March 1999 1.34
2000
1.14
2001
0.70 Collection Rate S$ Volume of Outgoing International Call Minutes Year Ended 31 March
1999
799
2000
885
1,031
As shown by the top graph, the average net collection rate has fallen from S$1.34 per minute in the year ended 31 March 1999 to S$0.70 per minute for the year ended 31 March 2001. This decline in collection rates has been offset, in part, by a continuing increase in outgoing international call volumes (as shown in the lower graph).
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(b) Public data and private network services SingTel is the leading provider of public data and private network services in Singapore. SingTel also provides these services outside Singapore, where applicable regulations permit. SingTels public data and private network services for its residential, corporate and carrier customers include ISDN business lines, point-to-point leased lines, and higher-end managed network services such as frame relay, ATM, hosting and colocation services through its existing Internet data centres in Australia, Hong Kong, Japan and Singapore. SingTel aims to become the total solutions provider to its customers, providing guaranteed quality-of-service and end-to-end connectivity. SingTels leased line business generates the major part of the operating revenue from public data and private network services business. With Internet-related communications requirements growing and the full liberalisation of the Singapore communications industry leading to greater take-up of leased lines, SingTel expects this business to become an increasingly important driver of operating revenue. SingTel offers three major Internet-related services within its public data and private network services business. These are described below. SingTel IX SingTel IX operates one of the largest Internet exchanges in the Asia Pacific region (excluding Japan). It provides a high quality IP transit service through its extensive network. SingNet SingNet has the highest number of paying subscribers among ISPs in Singapore. It offers a comprehensive suite of dial-up, leased line and broadband Internet access and other value-added services. As at 31 March 2001, it had close to 293,000 subscribers, about 50% of the subscription-based dial-up market and 54% of the corporate Internet leased line market. Internet access with e-mail accounts is provided free of charge to all of SingTels fixed line customers through the mysingtel.com portal, which had more than 1.2 million registered users at 31 March 2001. SingNet was named Singapores Best Internet Service Provider 2000 (Computer World Magazine Annual Awards). Magix Magix is SingTels broadband interactive multimedia service. It was launched in 1997, making SingTel one of the early pioneers in broadband interactive services in the world. Magix uses ADSL technology to provide users with high-speed Internet access as well as various multimedia services such as video streaming and educationon-demand. As at 31 March 2001, Magix had approximately 30,000 subscribers.
Public Data and Private Networks Three Year Revenue Performance Year Ended 31 March 1,065 763 621
S$ million
1999
2000
2001
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S I N G T E L A N D I T S S T R AT E G Y
The public data and private network business is experiencing the largest revenue growth of all of SingTels businesses. As the above graph shows, operating revenue has grown 72% from S$621 million for the year ended 31 March 1999 to S$1.1 billion for the year ended 31 March 2001. Operating revenue from leased lines grew during that period by 42.3%, but the strongest growth came from Internet-related revenues which grew by 46.3% and which now amount to more than S$230 million. SingTels data services strategy is to maintain and control an extensive, high capacity network that connects its retail and wholesale customers to key Asia Pacific markets as well as to Europe and North America. SingTel also intends to extend the geographical reach of its networks by expanding its existing Internet data centres over the coming 18 months. SingTel believes these initiatives will position it well to take advantage of the growth in demand for bandwidth resulting from increasing Internet usage and e-commerce activities. (c) Mobile communications services SingTel provides mobile communications services, including cellular, paging and maritime and aeronautical communications. The majority of the operating revenue from these services is derived from cellular services. SingTel is the leading mobile communications operator in Singapore with approximately 1.5 million cellular subscribers and a market share of approximately 56% as at 31 March 2001. SingTel offers both post-paid and pre-paid services on its dual band GSM900 and GSM1800 networks. Of SingTels 1.5 million mobile subscribers, approximately 38% are pre-paid subscribers. Mobile penetration in Singapore has grown rapidly since 1997, with market penetration reaching approximately 68% as at 31 March 2001. SingTels key strategies and initiatives already taken to maintain its significant presence in the mobile communications market, and to grow its mobile communications business, include the following: SingTel focuses on bringing new and innovative products and services to the market to meet the needs of its various customer groups; in June 1999, SingTel became one of the first in the world to offer a mobile etrading service; SingTel was the first to offer dual band GSM900/GSM1800 service in Singapore; in October 2000, SingTel launched GPRS which supports a data rate of up to 115kbps; SingTel launched a WAP service in February 2000; on 23 April 2001, SingTel was awarded 3G spectrum rights and an FBO licence after payment of the licence fee of S$100 million. Prior to award of the licence, SingTel, together with NTT DoCoMo and the Centre for Wireless Communications (part of the National University of Singapore), was the first in Singapore to complete trials on Wideband CDMA, a 3G cellular system; and SingTel continues to improve its mobile communications services to customers while they are overseas. SingTels customers can roam to over 135 destinations worldwide, which is greater coverage than is available from any other Singapore operator.
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SingTel Cellular Subscribers Year Ended 31 March 1999 745
2000
1,058
1,537
As the above graph shows, SingTels cellular subscriber base increased by 106% from 745,000 as at 31 March 1999 to 1.54 million as at 31 March 2001, as the overall market experienced significant growth. Despite the entry of a third operator, SingTel continues to hold a commanding market share in both the pre-paid and the post-paid segments. SingTel believes it had the highest post-paid ARPU in the Singapore market of approximately S$83 for the year ended 31 March 2001 due to its high penetration of the corporate customer market. SingTel expects that competition in the mobile communications services market will continue to increase. However, SingTel believes that its high quality networks, good customer service, innovative marketing, and its integrated communications service provider model will enable it to compete successfully and to maintain its significant presence in this market. (d) National telephone services SingTel remains the dominant provider of national telephone services in Singapore, with a market share of over 99%. SingTel has an extensive national fixed line network infrastructure that can service almost all residential and business premises in Singapore. The national fixed line network is required to be open for competition as described in Section 3.4(a).
Direct Exchange Lines (DEL) Year Ended 31 March 692 1999 716 2000 787 2001 Number of Lines (000) Business Residential 1,158 1,945 1,107 1,823 1,086 1,778
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Operating revenue has grown steadily over the past three years from S$547 million for the year ended 31 March 1999 to S$588 million for the year ended 31 March 2001. As the above graph shows, the total number of working DELs has also grown over the past three years. Operating revenue growth has been achieved through enhanced network services, including caller identification, voicemail and call waiting. Such services now account for 20% of national telephone operating revenue. (e) IT and engineering services SingTels IT and engineering services business is a market leader in its field in Singapore. Both NCS and Aeradio have an extensive blue chip customer list in this business. The services provided through SingTels IT and engineering services business fall into the following main categories: global competency, comprising: consulting, providing advice on its customers IT and e-business strategies; and package-based solutions, including supply chain management, knowledge management, mobile commerce, enterprise resource management and customer relationship management; industry solutions, offering complete turnkey solutions to various industries, including government, banking and finance, transportation, telecommunications, and education. Services range from consulting, applications development to systems integration and maintenance; infrastructure integration, focusing mainly on the provision of networking integration for enterprise customers and infrastructure service providers; infrastructure outsourcing providing business recovery, call centre, data centre management, facilities management, groupware and messaging, hosting and Internet data centre services to its clients; and premises distribution, with its key business in distributing communications related equipment such as structured cabling and wireless devices to the enterprise market.
NCS is extending its activities to other markets in the region and has established offices or ventures in Australia, China, Hong Kong, India and Malaysia. It is focusing on providing services to corporate customers in the Asia Pacific region, leveraging on its extensive consulting and projects experience for customers in government and commercial sectors such as finance and banking, transportation and telecommunications in Singapore. Aeradio has a threefold strategy: to expand its customer base in the aviation, banking, environmental, healthcare, telecommunications, transport and other relevant industry sectors; to look for new business, making use of multi-disciplinary state-of-the-art technologies in providing solutions to meet its customers needs; and to build a regional presence leveraging off international investments by SingTel.
Over the past three years, the operating revenue of the IT and engineering services business has grown 40.8% from S$341 million for the year ended 31 March 1999 to S$480 million for the year ended 31 March 2001. (f) Postal and delivery services SingPost operates a network of more than 1,000 postal outlets throughout Singapore. SingPost offers a wide range of postal services, including domestic mail, international mail, express mail, parcel services, retail sales (including postal and agency products) and philatelic sales. In the year ended 31 March 2001, SingPost delivered 825 million items nationally and internationally. SingPost faces a number of challenges in these markets, including higher costs and the increasing use of electronic communication services.
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SingPost has implemented a number of strategies to address these issues, including increasing its focus on direct mail and printed matter distribution, maintaining competitive pricing and adding various value-added services. For example, SingPost has introduced a number of e-commerce facilities, such as vPOST (a bill presentment and payment portal), ID.Safe (a digital certification authority system for electronic transactions) and First Cube (a smart locker delivery system). In the highly competitive express mail and parcel services market, SingPost has a dominant presence in Singapore. In the outbound international market, SingPost faces competition from international operators such as DHL, UPS and Fedex. SingPost has sought international partnerships and alliances as part of its growth strategy. In March 2000, SingPost, TNT Post Group NV (of The Netherlands) and the British Post Office signed an agreement to create the worlds largest international mail partnership, subject to meeting regulatory conditions. The joint venture will focus on cross-border mail to better serve the needs of businesses seeking global reach. Postal services revenue over the past three years has grown by 10.8% from S$308 million for the year ended 31 March 1999 to S$341 million for the year ended 31 March 2001. (g) Other businesses In addition to the businesses outlined in detail above, SingTel participates in a number of other businesses, including: (i) Equipment sales This business is involved in the sale of communications equipment to corporate and retail customers through direct marketing, retail outlets and the Internet. In December 1999, the equipment sales division introduced hello!, a new retail concept for a chain of communications lifestyle stores that provide and support SingTels full range of services, including Internet caf facilities. (ii) Directory publishing and advertising This business produces the Singapore Phone Book and Yellow Pages in print, Internet, WAP and telephone operator-assisted form. In recent years, a reduction in advertising expenditure by corporate customers due to general economic conditions has resulted in declining revenue. The business unit has taken steps to address this by venturing into related media businesses both locally and in the Asia Pacific region.
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Using ADSL technology, SingTels Magix service provides video streaming speeds of up to 2.5mbps, as well as high speed Internet access, on a point-to-point basis. Magixs ADSL coverage area is approximately 98.4% of Singapore. SingTels broadband network meets the requirements of its corporate customers to communicate by way of voice and video at the same time. SingTels ATM service, launched in June 1998, offers customers a high-speed technology that enables multimedia (voice, text, data, image and video) transmissions on a single platform. The same technology recently enabled SingTel to win a project to link up all schools in Singapore to the Ministry of Education via a nationwide ATM network to promote interactive multimedia-based learning. In October 2000, SingTel announced a S$50 million five year investment in Meg@POP, a new generation IP-centric service platform in Singapore. Using this platform, SingTel offers business customers, ISPs and content providers a one-stop, broadband solution to enable the provision of IP-based services, such as VPN, high-speed Internet, e-business and broadband multimedia applications. (ii) Mobile networks To date, SingTel has invested more than S$1.1 billion in its mobile networks. As at 31 March 2001, customers are supported by over 1,700 base stations nationwide, providing extensive coverage indoors and outdoors. SingTels digital GSM900 and GSM1800 cellular networks cover all of Singapore. SingTels coverage during the quarter ended 31 March 2001 is rated at 100% for GSM900 and 99.92% for GSM1800. SingTel intends to roll out a 3G network that will maintain SingTels competitive edge, subject to the availability of handset technology and to market readiness. (b) International networks International communications traffic to and from Singapore is transmitted via submarine fibre optic cables, satellite and microwave systems. SingTels international network provides both direct and indirect connections from Singapore to more than 100 countries.
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to USA > JAPAN KOREA Chikura CHINA Shanghai to Hawaii/USA > to USA > to USA > to USA > Okinawa to USA >
TAIWAN
Guam
APC APCN China-US Cable Japan-US Cable SEA-ME-WE3 APCN 2 (3Q 2001 ) C2C Phase 1 (3Q 2001) C2C Phase 2 (4Q 2001) i2i (1Q 2002) Branching unit Landing point Satellite
BRUNEI
Jakarta
INDONESIA
to Australia >
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(i) Submarine cable systems Through its ownership and investments in a number of global submarine cable systems, SingTel is favourably placed to ensure competitive bandwidth prices and sufficient capacity to meet the exponential growth expected in broadband and multimedia communications services including ATM, IP and video transmissions. SingTel constantly seeks investments into new submarine cable systems to achieve the lowest optimal unit cost for international bandwidth. SingTel is an investor in some of the worlds major submarine cable systems, such as SEA-ME-WE 2, SEA-ME-WE 3, APCN, Japan-US, China-US, Australia-Japan and APCN2. SingTel is taking the lead in implementing two new submarine cable projects in the pan-Asian region and the Indian Ocean region, namely the C2C and i2i cable networks. Both will utilise the most up-to-date technology and the largest submarine cable capacity to be delivered to the respective regions to date. The C2C cable network is expected to be completed in December 2001 and will connect Singapore to other Asian countries such as China, Hong Kong, Japan, Korea, the Philippines and Taiwan. C2C will further provide onward bandwidth connectivity to North America via capacity on new trans-Pacific cable systems. SingTels interest in C2C is 59.5% as at 31 March 2001, and its initial financial commitment to C2C is estimated to be approximately US$320 million. The first cable of the i2i cable network is expected to be ready for commercial service by the first quarter of 2002 and will provide direct connectivity from Singapore to India. SingTels interest in i2i is approximately 50% as at 31 March 2001, and its initial financial commitment to the i2i cable network is estimated to be approximately US$75 million. Optus, TCNZ and SingTel are currently involved in feasibility studies for a submarine cable project linking Australia, Indonesia and Singapore. It is currently envisaged that the cable may be ready for commercial service by the fourth quarter of 2002. As part of the feasibility studies, Optus, TCNZ and SingTel have commissioned market demand surveys and desktop surveys for the project. The three sponsors have also issued a tender to potential suppliers. It is currently anticipated that each sponsor will contribute equally to the equity component of the project financing. (ii) Satellite systems Satellite systems play a major role in providing an alternative to cable networks as well as direct connection to countries that are otherwise not accessible by submarine cable. SingTel has four major satellite stations providing direct transmissions to over 80 countries. SingTels satellite systems are used to meet demand from its customers for international services, including leased lines, VSAT, broadcasting and Internet. Apart from being an investor in the worlds largest satellite systems such as INTELSAT and INMARSAT, SingTel also launched its own satellite in August 1998. The ST-1 satellite, co-owned with Chung Hwa Telecom of Taiwan, supports communications and broadcasting services with broad coverage, swift response times and competitive prices. The ST-1 satellite has a footprint covering most of Asia up to the borders of Russia. SingTel has also recently invested about US$112 million to lease 15 transponders in the APSTAR V satellite, to be launched in the first quarter of 2003. (iii) Microwave systems SingTels microwave systems link Singapore with Malaysia and Batam (in Indonesia). These systems complement the cable and satellite links to these countries. There are currently five microwave links to Malaysia and two to Batam. (iv) SingTel IX SingTel IX is one of the largest Internet bandwidth providers in the Asia Pacific region (excluding Japan). Its network includes more than 900mbps of bandwidth to the United States, connections to more than 30 countries, dedicated points of
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presence in major cities around the world, including Hong Kong, London, New York, San Francisco, Sydney and Tokyo, more than 20 private peering partners within the Asia Pacific region, public peering in key locations such as PAIX, LINX, and JPIX and connections to more than 70 Asia Pacific ISPs. Additional points of presence are planned for Chicago, Los Angeles, Osaka, Seoul and other major cities. (v) Internet data centres NCS Digit@l Centrix provides co-server hosting services for customers who require Internet data centre facilities and services. The services help companies to go on-line quickly without the need for significant up-front investment. Digit@l Centrixs Internet network has a 155 mbps link leading to SingTel IX. Stor@ge Centric is a value-adding service under Digit@l Centrix, partnering with leading storage services provider, EMC. Stor@ge Centric provides a flexible and cost-effective suite of pay-as-you-grow managed storage services. (vi) International ATM network SingTels international ATM service was implemented in 1998. Bilateral ATM service has been established with 10 major telecom operators, providing SingTel customers connectivity to Australia, China, Germany, Hong Kong, Japan and the United States. SingTels ConnectPlus Managed ATM service is now available in key global communications hubs like Hong Kong, London, New York, San Jose, Sydney and Tokyo through its own points of presence. In partnerships with others, the coverage is extended to Indonesia, Malaysia, the Philippines, Thailand and major European and North American cities. (c) E-Commerce and Internet network infrastructure SingTels strategy is to leverage its network infrastructure and other capabilities across its businesses to provide e-commerce solutions, on-line media services and infrastructure along the value chain. SingTels involvement extends from provision of terminals, access and content to procurement and fulfilment.
SingTel MHS
SingTel IX
Technology Enablers
Regional Backbone
Internet Access
End Users
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(i) Internet access service providers SingTel provides Internet access services through SingNet, SingTel IX and Magix, as described above in Section 3.6(b). (ii) Infrastructure and enablers Through NCS and SingTel IX, SingTel builds and provides an e-commerce infrastructure and platform on which businesses can conduct business transactions and can also set up e-commerce businesses and operations. Digit@l Centrix and Consumer Connect provide a complete e-commerce infrastructure that assists companies to move their brick-and-mortar businesses online. To gain exposure to the business-to-business market, SingTel launched SESAMi.com in September 1999. Targeted at businesses across Asia, SESAMi.com provides the leading online e-infrastructure for business by providing trading communities that can be readily tapped for e-commerce. With the recent merger with Asia2B.com Holdings Limited, both SESAMi.com and Asia2B.com Holdings Limited are now held under one holding company, namely, SESAMi Inc., in which SingTel has a 44.5% interest. SESAMi Inc. now has offices in Beijing, Hong Kong, Mumbai and Singapore. MERCURiX Pte Ltd, a subsidiary of SingTel, provides intellectual property rights protection in the digital domain, enabling content providers to price and securely distribute digital merchandise such as music, video, text and other multimedia material. (iii) Portals and content Lycos Asia is one of the largest Internet portals in Asia with 11 local websites in Asia. (iv) Bill presentment/payment and fulfilment SingPost provides bill presentment and payment and fulfilment services through vPOST, ID.Safe and First Cube. vPOST enables consumers to pay bills on-line. Fulfilment of orders, a vital component in the e-commerce value chain, is provided through SingPosts mail delivery network and services. In addition, First Cube, an electronic locker system provides a safe delivery infrastructure for the last mile to the home. (v) Investing in high-tech start-ups SingTel Ventures was established in 1997, and manages SingTels S$225 million venture capital fund. From the inception of the fund up to 31 March 2001, SingTel Ventures had invested and committed over S$162 million in about 34 entities. It provides equity capital, strategic advice and assistance to high-tech start-ups in the IT and communications industries, which are developing new technologies, products, applications and services related to SingTels business. These early-stage technology investments enable SingTel to gain early access to the latest technologies and potentially introduce them to its customers. SingTel Ventures has also engineered various strategic relationships between its portfolio companies and SingTels business units. SingTel Ventures ultimate intention is to divest its investments through initial public offerings or trade sales. (d) SingPost infrastructure SingPost operates a network of more than 1,000 postal outlets throughout Singapore. In addition, it operates a sorting centre and 11 delivery bases for processing domestic and international mail and parcels.
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SingTel, together with its Associated Companies (excluding Belgacom), has a total of 7.3 million cellular and 2.9 million fixed line subscribers in the Asia Pacific region as at 31 March 2001. Taking into account SingTels percentage interests, this represents 3.2 million cellular and 2.3 million fixed line subscribers on a proportionate basis. Further information about SingTels major international investments is set out below. (a) AIS AIS is the leading cellular operator in Thailand operating analogue NMT 900 and GSM 900 cellular networks. As at 31 March 2001, AIS had approximately 50% market share in Thailand and had 2.43 million cellular subscribers. It has experienced rapid subscriber growth, with an average of 150,000 net new subscribers being added every month in the first quarter of 2001. AIS is listed on the Stock Exchange of Thailand. For the year ended 31 December 2000, AIS reported operating revenue of THB37 billion and net profit after tax of THB6.6 billion. The market capitalisation of AIS on 30 April 2001 was THB117.4 billion. SingTels effective equity interest in AIS is 21.0%. AIS major shareholder is Shin Corporations Public Company Limited, Thailands leading broad-based communications conglomerate. (b) Globe Telecom Globe Telecom is an integrated provider of fixed line, cellular, international telephone, inter-exchange carrier, data communications and Internet services in the Philippines. Globe Telecom is the number two provider of cellular services in the Philippines with approximately 3 million subscribers as at 31 March 2001. Its subscriber base has grown by approximately 17% in the first quarter of 2001. Globe Telecom is listed on the Philippines Stock Exchange. For the year ended 31 December 2000, Globe Telecom reported revenue of PP20.1 billion and net profit after tax of PP1.5 billion. The market capitalisation of Globe Telecom on 30 April 2001 was PP49.7 billion. SingTels domestic partner in Globe Telecom is the Ayala Group, which is one of the Philippines leading corporate groups.
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On 7 March 2001, SingTel announced that Globe Telecom had signed a series of agreements to bring it closer to acquiring Isla Communications Co., Inc., also an integrated communications service provider in the Philippines. The acquisition will enable Globe Telecom to expand its customer base and the geographic reach of its services in the Philippines. The acquisition is expected to be completed in mid 2001. SingTels effective equity interest in the enlarged Globe Telecom, after legal completion of the acquisition of Isla Communications Co., Inc., is estimated to be 23.6%. (c) Bharti Group Bharti Group is a leading private fixed line and mobile communications service provider in India. Bharti Group also provides Internet services in India. With the liberalisation of the telecommunications industry in India, Bharti Group is looking to add domestic long distance telephone services to its existing communications portfolio in addition to extending its cellular and fixed line services footprint to new territories within India. SingTels interest in Bharti Group consists of a 20% equity interest in Bharti Telecom Limited and a 15.5% equity interest in Bharti Tele-Ventures Limited, a subsidiary of Bharti Telecom Limited. SingTels effective equity interest in Bharti Tele-Ventures Limited is approximately 28.5%. On 7 May 2001, SingTel announced that it would increase its investment in Bharti Group by up to US$200 million. It is expected that SingTels effective interest in the Bharti Group will increase. The percentage shareholding will depend on the investment structure which is yet to be finalised. Bharti Group also announced that a number of other financial investors, including E.M. Warburg Pincus, have also separately committed investments in Bharti Group totalling up to US$260 million. (d) NCIC In March 2000, NCIC was awarded a facilities-based licence to operate a fixed line network in Taiwan. NCIC plans to offer data and broadband services, leased line and Internet backbone services, as well as international, domestic long distance and local voice services. NCIC launched its commercial operations in March 2001 using the brand name sparq*. SingTels effective equity interest in NCIC is 24.3%. SingTels strategic partner in NCIC is the Far Eastern Group, which is one of Taiwans largest non-electronics industrial groups. The Far Eastern Group also has a significant interest in Taiwans fast-growing cellular player, Far EasTone. (e) Virgin Mobile Asia In November 2000, SingTel entered into a joint venture with the Virgin Group to provide MVNO services in Singapore and other Asian countries (excluding Japan). The joint venture, Virgin Mobile Asia, intends to launch its services in Singapore in 2001. It also intends to enter the Hong Kong and Taiwan markets in the next 18 months, depending on the feasibility of the business case in each market. SingTel will hold an effective equity interest of 50% in Virgin Mobile Asia upon the completion of its agreed capital injection. (f) APT Satellite APT Satellite primarily provides high quality satellite transponder and telecommunications services for the international and Asia Pacific broadcasting and telecommunications sectors. It currently operates three in-orbit satellites, APSTAR I, APSTAR IA and APSTAR IIR, through its own satellite control centre. It has commissioned the launch in early 2003 of a new high-powered satellite, APSTAR V, to replace APSTAR I and to satisfy anticipated demand for transponders. SingTel has committed to lease 15 transponders on the APSTAR V satellite. APT Satellite is listed on the Hong Kong Stock Exchange. For the year ended 31 December 2000, APT Satellite reported revenue of HK$341.5 million and net profit after tax of HK$143 million. The market capitalisation of APT Satellite on 30 April 2001 was HK$1,331.3 million.
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SingTel has an effective equity interest of 20.35% in APT Satellite. Other investors include China Telecommunications Broadcast Satellite Corporation, China Aerospace Science and Technology Corporation, CASIL Satellite Holdings Limited and Kwang Hua Development and Investment Ltd. (g) DPC DPC provides cellular services in Thailand, using the digital PCN system. SingTel announced its acquisition of an interest in SDT on 4 May 2001. SDT has a 47.55% equity interest in DPC. Through this acquisition, SingTel has an effective equity interest of 14.3% in DPC. Shin Corporations Public Company Limited, SingTels partner in AIS, is also its strategic partner in SDT. (h) BSI BSI has a joint operation agreement with PT Telkom, Indonesias monopoly national telephone services provider, to provide fixed line services in Eastern Indonesia (including Bali, Sulawesi, Irian Jaya, Ambon and West Timor) for 15 years from 1995 to 2010. BSI is responsible for managing, operating, repairing and maintaining PT Telkoms existing lines and constructing an agreed number of new lines in the Eastern Indonesia region. In the year ended 31 December 2000, BSIs share of revenue from the joint operation was Rp345 billion. BSI reported an operating income of Rp183 billion and incurred a net loss of Rp151 billion. The net loss is mainly due to foreign exchange losses. SingTel has an effective equity interest of 40.0% in BSI. The terms of BSIs joint operation agreement are under review with PT Telkom. As a result of that review, the future of SingTels investment in BSI is uncertain. (i) Lycos Asia Lycos Asia was established in 1999. It provides localised versions of the Lycos.com and Tripod consumer portals to Asian markets. It is one of the largest Internet portals in Asia with 11 local web sites in Asia. In Singapore, Lycos Asia is in a leading position, and, in China, one of the worlds top 10 Internet markets, Lycos Asia is among the top 10 portals. SingTel holds an effective equity interest of 50% in Lycos Asia. (j) Belgacom Belgacom is the leading and incumbent communications company in Belgium providing a full range of services in mobile, local, regional and international telephone services, leased lines, data communications and terminal equipment in Belgium. Belgacom is owned by the Belgian State and ADSB Telecommunications B.V., a consortium comprising SBC Communications, Tele Danmark, SingTel and Belgian financial investors. For the financial year ended 31 December 2000, Belgacom reported revenue of Bef207.4 billion and net profit after tax of Bef19.3 billion. SingTel holds an effective equity interest of 12.15% in Belgacom. (k) Other investments and joint ventures In addition to the investments listed above, SingTel has a number of smaller investments in Singapore and throughout the Asia Pacific region. These investments include an interest in PointAsia Dot Com (Thailand) Limited in Thailand and Infoserve Technology Corporation in Taiwan, both of which are ISPs.
3.9 EMPLOYEES
SingTel has approximately 13,400 employees. More than 98% of SingTels employees are employed on a full time basis. Just over half of SingTels employees are represented by Singapore labour unions, with approximately 7,200 employees being members of the Union of Telecoms Employees of Singapore and approximately 110 SingTel Yellow Pages employees being members of the Singapore Manual and Mercantile Workers Union. The remainder of SingTels employees are covered by individual employment contracts. SingTel has no recorded lost working time as a result of industrial disputes in the last five years.
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3.10 PROPERTY
A large part of SingTels network infrastructure is located on land in relation to which SingTel, as a public telecommunications licensee, is entitled to certain rights of access for the purposes of erecting and maintaining plant and equipment used for the provision of telecommunications services. SingTel also owns and occupies land on which its telephone exchanges are located. SingTel owns approximately seven sites and occupies approximately 60 sites under a lease or other basis, most of which are used for SingTels communications operations. SingPost also owns or occupies under a lease or other basis approximately 71 sites which are used to support its postal and delivery service operations. In addition to these operational sites, SingTel owns or leases properties used for office accommodation, storage and other corporate purposes.
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MG Lim Chuan Poh Major-General Lim was appointed a non-executive Director of SingTel in April 1997 and is a member of the Executive Committee. He is currently the Chief of Defence Force with the Singapore Armed Forces. He is also a Director of Singapore Technologies Engineering Ltd and the Defence Science and Technology Agency. He was awarded the Public Administration Medal (Gold) (Military) in 1999. Quek Poh Huat Mr Quek has been a non-executive Director of SingTel since December 1995. He is a member of the Nominations and Executive Committees. He is currently the President of Temasek. He was the President of Singapore Technologies Pte Ltd and Chairman of Singapore Technologies Aerospace Ltd before joining Temasek in September 1995. Seah Kian Peng Mr Seah was appointed a non-executive Director of SingTel in November 1999 and is a member of the Audit Committee. He is currently the Chief Executive Officer of NTUC Media Co-operative Ltd and the Chief Operating Officer of NTUC Fairprice. Jaspal Singh Mr Singh was appointed a non-executive Director of SingTel in April 1999. He is a member of the Audit Committee. He is currently a Deputy Secretary in the Singapore Ministry of Communications and Information Technology. Prior to this, he was a Deputy Secretary in the Ministry of Finance. Jackson Peter Tai Mr Tai was appointed a non-executive Director of SingTel in November 2000. He is a member of the Audit Committee. He is currently the President and Chief Operating Officer of The Development Bank of Singapore Limited (DBS Bank). Prior to joining DBS Bank in July 1999, Mr Tai completed 25 years of service with J. P. Morgan & Co., where, among other assignments, he was senior officer for the Asia Pacific region and senior officer for the Western United States. Keith Tay Ah Kee Mr Tay was a Board member of the former TAS between October 1986 and March 1992. He has been a non-executive Director of SingTel since April 1992 and is currently the Chairman of the Boards Audit Committee and a member of the Compensation Committee. He was Chairman and Managing Partner of KPMG Peat Marwick from 1984 to 1993. He now serves on the Boards of several public companies and is the Chairman of DCS Solutions Ltd. He is a Board member of the Singapore International Chamber of Commerce, of which he is a Past Chairman. He is also Honorary Vice President of the Singapore Institute of Directors. Senior Management Lim Toon Chief Operating Officer Mr Lim was appointed Chief Operating Officer of SingTel in April 1999. He is responsible for synergising the operations of SingTels customer units as well as shared-resource units like network service, customer service and corporate marketing. He has been with SingTel since 1970 and, since 1983, has held top management positions in various areas including engineering, radio services, traffic operations, human resources and information systems. He holds a First Class Honours degree in Engineering from the University of Canterbury (New Zealand). Lucas Chow Wing Keung Executive Vice President, Consumer Business Mr Chow was appointed Executive Vice President (Consumer Business) in July 2000. He is also the Chief Executive Officer of SingTel Mobile. Mr Chow joined SingTel in May 1998 as Group Director (Total Quality). Before joining SingTel, he held several senior positions in Hewlett Packard where he worked for 20 years. He graduated with a Bachelor of Science (Honours) degree from the University of Aston, Birmingham (United Kingdom).
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Chua Sock Koong Chief Financial Officer Ms Chua has been Chief Financial Officer of SingTel since April 1999, with overall responsibility for all financial functions of SingTel, including treasury, tax, insurance and risk management, as well as the corporate development, company secretarial, legal, international affairs and regulatory functions. She joined SingTel in 1989 as Treasurer. A Certified Public Accountant in Singapore and a Chartered Financial Analyst, she graduated from the University of Singapore (now called the National University of Singapore) with First Class Honours in Accountancy. William Hope Executive Vice President, Network Mr Hope joined SingTel as Executive Vice President (Network) in October 2000. Prior to this, he was the Chief Technical Officer with Optus in Australia and was responsible for Optus local, long distance, mobile, IP and satellite networks. He graduated with First Class Honours in Bachelor of Science from the University of Western Australia and was awarded the HC Levey Prize (University Prize for Mathematics). Lee Shin Koi Executive Vice President, Customer Service Mr Lee was appointed Executive Vice President (Customer Service) in August 2000. He joined SingTel in 1972 and, throughout his 29 years with SingTel, has held various positions in postal services, finance, telephone sales, personnel, mobile and consumer business. He holds a Bachelor of Accountancy degree from the University of Singapore (now called the National University of Singapore). Lim Chuan Poh Executive Vice President, Corporate Business Mr Lim joined SingTel in October 1998 as Chief Executive (Fixed Line Services) and was appointed Executive Vice President (Corporate Business) in April 1999. Prior to joining SingTel, he served in different senior appointments in the Singapore Civil Service. His last appointment before joining SingTel was as Deputy Secretary in the Ministry of Communications. He graduated with an Honours degree in Engineering Science from Oxford University and has a Masters degree in Public Health Engineering from the Imperial College of Science and Technology, University of London. Lim Shyong Executive Vice President, Global Business Mr Lim was appointed Executive Vice President (Global Business) in April 1999. He joined SingTel in 1972 and, since 1992, has held top management positions in various areas including international market development, international carrier services and business communications. He graduated with a Bachelor of Engineering (Electrical) from the University of Singapore (now called the National University of Singapore) and was awarded a Masters in Business Administration from INSEAD in 1982 under a French Government Scholarship. Sin Hang Boon Chief Executive Officer, Singapore Telecom International Mr Sin was appointed Chief Executive Officer of STI in January 1999. He joined SingTel in 1960 and has held numerous positions in a variety of areas. He has been a member of the top management team for 14 years. From 1996 to 1998, he was seconded to Belgacom of Belgium, in which SingTel has an equity stake. He has a Bachelor of Science degree in Physics from Nanyang University and a post-graduate diploma in Business Administration from the University of Singapore. He has also attended the Advanced Management Programme at Harvard. William Tan Soo Hock Chief Executive Officer, Singapore Post Mr Tan was appointed Chief Executive Officer of SingPost in June 1998. He joined SingTel in 1971 and has held top management positions in corporate finance and postal operations before assuming his current position. He was seconded to PT Bukaka SingTel International in Indonesia from 1996 until 1998. He holds an Honours degree in Electrical Engineering from the University of Auckland (New Zealand).
46
S I N G T E L A N D I T S S T R AT E G Y
Shareholders funds Issued and paid up share capital(2) Reserves Total shareholders funds Total borrowings (unsecured) Long term bonds(3) Total capitalisation and indebtedness
Notes: (1) Exchange rate US$0.5556/S$1 (2) See table below for details (3) On 15 March 2001, SingTel issued a 5-year fixed interest unsecured bond of S$1 billion due 2006, carrying interest at 3.21% per annum.
The following table sets out the authorised and issued capital of SingTel as at 31 March 2001 and 31 March 2000.
2001 S$ MILLION 2000 S$ MILLION
Authorised share capital 33,333,333,330 ordinary shares of S$0.15 each and 1 Special Share of S$0.50 Issued and paid up share capital Ordinary shares at S$0.15 each (Shares) Balance as at 1 April 15,473,154,226 (2000: 15,249,938,788) Shares Issue of 787,900 (2000: 223,932,438) Shares Repurchase of 60,778,000 (2000: 717,000) Shares Balance as at 31 March 15,413,164,126 (2000: 15,473,154,226) Shares 1 Special Share at S$0.50
* denotes amount of less than S$50,000
5,000.0
5,000.0
Operating revenue(1) 4,925.5 Operating expenses(2) ( 3,036.9) ( Operating profit 1,888.6 Other income 93.2 Compensation from IDA 337.0 Share of results of associated and joint venture companies 348.9 Earnings before interest and tax 2,667.7 Net finance income 384.5 Profit before tax 3,052.2 Taxation (715.1) Profit after tax 2,337.1 Minority interests (12.9) Profit before extraordinary items 2,324.2 Extraordinary items (317.9) Profit attributable to shareholders 2,006.3 EPS before extraordinary items (cents) 15.06 EPS after extraordinary items (cents) 13.00 EBITDA (S$ million)(3) 3,290.2
NM Not Meaningful
4,865.8 4,883.5 1.2% 3,013.1) (2,910.4) 0.8% 1,852.7 1,973.1 1.9% 35.2 31.8 164.8% NM 367.5 2,255.4 265.4 2,520.8 (661.5) 1,859.3 (20.4) 1,838.9 701.0 2,539.9 12.00 16.58 3,037.1 291.7 5.1% 2,296.6 18.3% 305.7 44.9% 2,602.3 21.1% (670.3) 8.1% 1,932.0 25.7% (19.2) 36.8% 1,912.8 26.4% 87.0 NM 1,999.8 21.0% 12.54 25.5% 13.11 21.6% 2,817.9 8.3%
0.4% 3.5% 6.1% 10.7% NM 26.0% 1.8% 13.2% 3.1% 1.3% 3.8% 6.3% 3.9% 705.7% 27.0% 4.3% 26.5% 7.8%
1.2% 6.3% 10.5% 38.4% NM 988.4% 0.6% 13.0% 1.9% 6.7% 5.3% NM 4.1% NM 12.1% 4.1% 12.1% 2.9%
47
S I N G T E L A N D I T S S T R AT E G Y
Notes: (1) Operating Revenue
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION 2001 % CHANGE 2000 % CHANGE 1999 % CHANGE
International Telephone Public Data and Private Network Mobile Communications National Telephone IT and Engineering Services Postal Services Sale of Equipment Directory Advertising Others Operating revenue (2) Operating Expenses
1,203.1 1,065.0 885.5 588.0 480.1 341.0 166.7 107.2 88.9 4,925.5
1,644.7 763.0 851.3 572.7 383.5 322.6 149.9 97.1 81.0 4,865.8
1,843.7 620.6 880.0 546.6 340.9 307.9 138.2 125.8 79.8 4,883.5
26.8% 39.6% 4.0% 2.7% 25.2% 5.7% 11.2% 10.4% 9.8% 1.2%
10.8% 22.9% 3.3% 4.8% 12.5% 4.8% 8.5% 22.8% 1.5% 0.4%
10.4% 10.5% 9.2% 1.4% 70.7% 1.3% 40.6% 3.4% 22.6% 1.2%
2001 S$ MILLION
2000 S$ MILLION
1999 S$ MILLION
2001 % CHANGE
2000 % CHANGE
1999 % CHANGE
Traffic Expenses Staff Costs Depreciation Selling and Administrative Cost of Goods Sold Repair and Maintenance Recoveries Operating expenses
665.4 700.8 813.1 5.1% 666.6 595.3 622.3 12.0% 624.1 782.8 521.7 20.3% 591.5 525.8 556.7 12.5% 461.8 352.6 358.5 31.0% 83.9 87.5 66.6 4.1% (56.4) (31.7) (28.5) 77.9% 3,036.9 3,013.1 2,910.4 0.8%
(3) EBITDA represents earnings before interest expense, investment and interest income, taxation, depreciation and amortisation, but after attribution of compensation from IDA and after the share of results of associated and joint venture companies. Summary Consolidated Balance Sheets As at 31 March
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
Current Assets Non-Current Assets Total Assets Current Liabilities Non-Current Liabilities Total Liabilities Net assets Share Capital and Reserves Minority Interests
7,962.4 8,190.2 16,152.6 3,807.1 3,829.5 7,636.6 8,516.0 8,065.7 450.3 8,516.0
6,896.0 7,020.8 13,916.8 3,030.6 2,281.4 5,312.0 8,604.8 8,569.7 35.1 8,604.8
7,350.1 5,586.4 12,936.5 2,911.4 2,412.7 5,324.1 7,612.4 7,573.1 39.3 7,612.4
48
S I N G T E L A N D I T S S T R AT E G Y
International telephone International telephone services remained the largest contributor to SingTels operating revenues, accounting for 38% of the total. Total outgoing minutes grew by 6.0% to 799 million minutes during the year. This growth was slower than the previous years growth due to the slowdown in Singapore and the regional economies. Operating revenue declined by 10.4% to S$1.84 billion, primarily as a result of price reductions by SingTel to ensure that its international telephone services remained competitively priced compared to international benchmarks, with a decline of 13.8% in average gross collection rate. Public data and private network The largest operating revenue growth, on a comparable basis, came from public data and private network services, which grew 10.5% to S$621 million. International and local leased lines were the main contributors to this growth. Greater demand for leased lines came from companies using applications which required higher bandwidth, as well as other operators providing cellular and Internet services. About S$60 million in annual savings were passed on to local leased line customers in terms of rate reductions, discounts, network modernisation and special schemes for ISPs and their customers. Prices for ISDN services were also reduced by up to 44%. These initiatives were designed to further strengthen SingTels competitive position as a regional hub and to stimulate demand. SingTels Internet businesses, SingNet and Magix, increased their subscriber bases to over 200,000 and 10,000 subscribers respectively during the year. Mobile communications Operating revenue from mobile communications services, including cellular, paging and maritime services, grew 9.2% to S$880 million, accounting for 18% of SingTels total operating revenue. SingTels cellular subscriber base saw strong growth of 15% during the year to 745,000 subscribers. SingTels cellular ARPU remained at about S$100, as SingTel continued to attract good quality customers to its networks. Average usage per user was estimated at 350 minutes per month. Growth in operating revenues from SingTels cellular services more than offset declining revenues from paging services, reflecting the continued migration of the subscriber base from paging to cellular services. Marketing promotions and the introduction of a customer loyalty program generated sales and encouraged customer retention. National telephone Operating revenue from national telephone services grew 1.4% to S$547 million, comprising 11% of SingTels total operating revenue. The total number of working Direct Exchange Lines increased by 5.5% to 1.78 million lines. A successful second-line-for-the-home campaign and increased Internet penetration stimulated demand for residential lines. As at 31 March 1999, approximately 19% of homes had more than one line, up from 15% in the previous year. Operating revenue from enhanced network services increased by 14%, and comprised 15% of national telephone operating revenue. IT and engineering services Operating revenue from IT and engineering services was S$341 million, accounting for 7% of SingTels total operating revenue. This represented a 70.7% increase over the prior year. This growth resulted from the acquisition of NCS in October 1997 which made its first full year contribution to SingTel. NCSs contribution to operating revenues was S$225 million. Postal services Operating revenue from postal services contributed 6% of SingTels total operating revenue. Revenue declined by 1.3% to S$308 million, due mainly to a 2.2% decline in mail traffic volume.
49
S I N G T E L A N D I T S S T R AT E G Y
Operating expenses Total operating expenses were approximately S$2.91 billion, an increase of 6.3% from the previous year. On a comparable basis (that is, excluding NCS), the overall increase in operating expenses was 3.5%. Traffic expenses, which comprised 28% of SingTels operating expenses, declined by 1.0% to S$813 million. Outpayments to other carriers, which accounted for more than 80% of traffic expenses, declined by 6.1% even though outgoing international telephone traffic increased by 6.0%. These declines resulted from aggressive accounting rates negotiation which saw settlement rates drop by more than 20%. Space segment and leased circuit rental charges were higher to meet increased demand for data services. Staff costs increased by 13.3% to S$622 million, and accounted for 21% of total operating expenses. Excluding NCS, staff costs would have increased by only 3.5%. Selling and administrative expenses amounted to S$557 million, an increase of 20.7% from the previous year. This was mainly due to an increase of S$52 million in the provision for doubtful receivables. Accelerated depreciation of S$90 million on account of technological obsolescence and for Y2K compliance resulted in an increase in depreciation charges of 14.6% to S$522 million. Cost of goods sold is associated with revenues from information technology and engineering services, sale of equipment and directory advertising. Cost of goods sold decreased by 10.8% primarily attributed to lower equipment sales. Profit As a result of the changes in revenues and expenses outlined above, SingTels operating profit decreased by 10.5% to S$1.97 billion. Contributions from Associated Companies grew significantly over the year due to higher contributions from Belgacom and Globe Telecom. For the year ended 31 March 1999, overseas investments contributed S$292 million, or 11.2%, to SingTels profit before tax. Contributions from overseas investments increased by S$265 million from the previous year. During the year, SingTel made its second largest investment to date by taking an effective 13% stake in AIS, the largest cellular operator in Thailand. During the year, SingTel adopted a conservative investment stance by increasing its cash and fixed income investments and reducing its exposure to equities, resulting in an increase of 13.0% in net finance income. Interest income increased by 36.8% due to an increase in interest rates and the higher level of fixed income investments. Investment income declined as a result of this portfolio restructuring. Profit after tax before extraordinary items grew by 4.1% to S$1.91 billion. Earnings per share before extraordinary items increased by 4.1% to 12.54 cents. There was a net extraordinary gain of S$87 million which was the result of gains realised from the sale of various long term portfolio investments, offset by provision for diminution in value for certain investments. The profit after extraordinary items amounted to S$2.0 billion, an increase of 12.1% from the previous year. Financial position As at 31 March 1999, SingTels total assets stood at S$12.94 billion, an increase of 11.2% from the previous year. This increase was largely a result of an increase of 14.5% in the cash and short term investments held by SingTel to S$6.4 billion on account of strong cash flow generated from operations as well as a 13.6% increase in property, plant and equipment, net of depreciation to S$4.6 billion. Capital expenditure for the year totalled S$1.1 billion, an increase of 15.1% from the previous year. Shareholders funds increased 16.1% to S$7.57 billion and net tangible assets per share was 49.66 cents, compared to 42.76 cents a year ago.
50
S I N G T E L A N D I T S S T R AT E G Y
(b) For the financial year ended 31 March 2000 The financial year ended 31 March 2000 was a period which saw an improvement in regional economies after the contraction experienced in the previous year. Overall, SingTel showed positive EBITDA and earnings growth for the year despite the continued implementation of price cuts to remain competitive. Profit growth reflected the continued success of SingTels internationalisation efforts through improved contributions from its core international investments and gains realised from the divestment of non-core international investments. EBITDA increased by 7.8% from S$2.82 billion to S$3.04 billion. Operating revenue SingTels operating revenue was S$4.87 billion, down by 0.4%. International telephone With the economic recovery, growth in total outgoing international traffic recovered and total outgoing minutes increased by 10.8%. Incoming minutes, however, declined by 4.8%. Alternative services, such as Budget Call 013, V019 and eVoiz, were introduced to enhance SingTels product offerings. These services contributed more than 20% to outgoing traffic. Various tariff reductions maintained SingTels competitiveness, but resulted in the average net collection rate declining by 14.9% to S$1.14 per minute. International telephone revenue declined by 10.8% to S$1.64 billion. Margin erosion was, however, mitigated by a decline in traffic expenses as a result of falling settlement rates. Public data and private network Public data and private network services continued to produce the largest operating revenue growth. Operating revenue for public data and private network services increased 22.9% to S$763 million. Revenues from local and international leased lines grew by 9.6% driven by strong growth in the demand for bandwidth arising from increased Internet and data communications needs. Growth from Internet related activities was particularly strong. Revenues from SingNet, SingTel IX and Magix grew by more than 100%. Total Internet-related revenues amounted to more than S$150 million. Despite intense competition, including from free Internet services, SingNet continued to show strong performance with more than 275,000 customers at the end of the financial year. mysingtel.com, SingTels own free Internet service, was introduced and made available to SingTels 1.1 million residential customers. Revenues from SingTel IX continued to strengthen as a result of increased demand from ISPs in the region. SingTels broadband service, Magix, saw a 150% increase in its subscriber base which rose to approximately 30,000 subscribers. Mobile communications Although competition continued to increase during the year, SingTel had a successful year, recording strong growth by attracting new users as well as retaining existing customers. SingTels average monthly net connections increased three-fold to more than 26,000, resulting in the total number of subscribers increasing from 745,000 to 1.1 million during the year. Innovative marketing campaigns and a successful loyalty program contributed to ensuring customer retention, reflected in a relatively low churn rate. Despite SingTels success in attracting and retaining subscribers, mobile communications revenue declined by 3.3% to S$851 million. This decline was mainly due to a 9.8% decline in operating revenue from paging services in line with the increasing shift to cellular services from paging services. Average usage traffic remained steady at 380 minutes per user per month compared to 350 minutes per user per month in the previous year. Monthly post-paid ARPU was
51
S I N G T E L A N D I T S S T R AT E G Y
maintained at more than S$90. The successful launch of new pre-paid services, and a ten-fold increase in SingTels pre-paid subscriber base, led to a reduction in overall ARPU from approximately S$100 to approximately S$80, as pre-paid ARPU is lower than postpaid ARPU. National telephone Operating revenue from national telephone services grew by 4.8% to S$573 million. The total number of working Direct Exchange Lines grew 2.5% to 1.8 million lines. With the economic recovery, there was a 3.5% increase in the number of business lines, resulting in a total of 716,000 business lines. The year also saw an increase in the number of residential lines, on the back of growing demand for a second line in the home. As at 31 March 2000, 21% of residential customers had more than one line. Operating revenue from enhanced network services increased 33% to S$116 million. Enhanced network services made up approximately 20% of operating revenue from national telephone services. IT and engineering services IT and engineering services saw revenue growth of 12.5% to S$384 million. The bulk of the revenue growth came from SingTels subsidiary, NCS, whose revenues increased substantially by S$61 million, or 25%. NCSs growth was achieved as a result of various factors including continued growth of the existing business, expansion into new markets and the continued growth in demand. Postal services Operating revenue from postal services was S$323 million, representing a 4.8% annual increase in line with improved economic conditions in Singapore. Postal services contributed 7% to SingTels total operating revenue. Mail volume increased 3.4% to 791 million items. Operating expenses Overall operating expenses increased 3.5% to S$3.01 billion. However, if accelerated depreciation costs were not accounted for this financial year and the preceding financial year, operating expenses, on a comparable basis, would have decreased by 1.9%. The largest cost component of operating expenses, traffic expenses, declined 13.8% to S$701 million. The cost of carrying traffic continued to be contained through aggressive settlement rate negotiations, resulting in international outpayment rates falling by 30.4%. As a result, overall outpayments, which contributed more than 80% of total traffic expense, fell by 18.9%. Staff costs, which accounted for 20% of operating expenses, fell 4.3% to S$595 million. Most of these savings resulted from the mandated rate reduction in employers CPF contributions, as part of the Governments initiatives in January 1999. SingTel took a one-off accelerated depreciation charge of S$245 million to reflect the results of an asset impairment review undertaken during the year, leading to an increase of 50% in depreciation expense. Selling and administrative costs declined by 5.6% to S$526 million largely on account of more cost effective advertising and promotional programs. Cost of goods sold declined 1.6%, which reflected better margins from IT and engineering services. Profit As a result of the slight decline in revenues and the impact of accelerated depreciation outlined above, operating profits decreased S$120 million or 6.1%. However, SingTels share of pre-tax profits of Associated Companies increased by S$76 million or 26.0%. This growth was consistent with SingTels continued internationalisation efforts and resulted in greater diversity in earnings streams. Significantly improved contributions from overseas investments, cost control initiatives and productivity gains enabled SingTel to record growth in EBITDA, which rose to S$3.04 billion.
52
S I N G T E L A N D I T S S T R AT E G Y
Interest income decreased by 19.8% due to a fall in interest rates, leading to a decline of 13.2% in net financial income. Profit after tax before extraordinary items decreased 3.9% to S$1.84 billion. Earnings per share before extraordinary items decreased 4.3% to 12.00 cents. During the year, SingTel realised gains from the sale of various long-term investments such as NetCom ASA and AAPT Limited of S$706 million. Together with provisions for certain investments, extraordinary items amounted to S$701 million, resulting in a profit after tax and extraordinary items of S$2.54 billion, a 27.0% increase from the previous year. Earnings per share after extraordinary items grew by 26.5% to 16.58 cents. Financial position As at 31 March 2000, SingTels total assets were S$13.92 billion, up S$980 million or 7.6%. The increase in total assets was driven primarily by additional investments in ventures. However, SingTels property, plant and equipment after depreciation decreased 2.5% to S$4.44 billion. Capital expenditure for the year decreased by 34.7% to S$714 million. Cash and short term investments decreased 7.4% to S$5.9 billion as about S$2.0 billion in total was distributed as special and final dividends during the year. SingTels Shareholders funds were S$8.57 billion, up S$997 million or 13.2% from 31 March 1999 and net tangible assets per share at 55.38 cents was 5.7 cents or 11.5% higher than a year ago. (c) For the financial year ended 31 March 2001 The financial year ended 31 March 2001 was a period which saw continued improvement in the regions economies. Operating revenues rose due to very strong growth in public data and private network services and IT and engineering services, which offset declining revenue from international telephone services. Overall, SingTel showed positive EBITDA and earnings growth for the year (before extraordinary items) notwithstanding the impact of competition arising from the full liberalisation of Singapores communications market on 1 April 2000. SingTels international investments continued to contribute significantly to profitability, although due to foreign exchange translation losses incurred by Globe Telecom, contributions were slightly lower than in the previous year. EBITDA increased 8.3% from S$3.04 billion to S$3.29 billion. Operating revenue SingTels operating revenue was S$4.93 billion, an increase of 1.2%. International telephone The improved economic conditions and liberalisation of Singapores telecommunications market led to a sharp increase in international call volumes. SingTel recorded a strong 16.5% growth in total outgoing international traffic, driven by cellular IDD calls and wholesale business. Incoming minutes, however, decreased 2.8%. SingTel continued to implement tariff reductions, which were successful in maintaining its competitiveness and ensuring minimal loss of market share to competitors in the face of full competition. These tariff reductions resulted in the average net collection rate declining by 38.3% to S$0.701. SingTels estimated market share of outgoing calls over the year was in excess of 90%. As a result of tariff reductions, international telephone revenue declined by 26.8% to S$1.2 billion. Margin erosion continued to be mitigated by declines in traffic expenses as described below. Public data and private network Public data and private network services continued to grow at a rapid pace, registering the highest growth rate amongst SingTels businesses. Operating revenues grew by a record 39.6% to almost S$1.1 billion.
53
S I N G T E L A N D I T S S T R AT E G Y
Revenues from leased lines grew by 30% and continued to be driven by strong growth in demand for international bandwidth. Demand was particularly strong from new competitors requiring leased line capacity to provide telecommunications services in Singapore and in the region. SingTels Internet related activities continued their robust growth. Revenues from SingNet, SingTel IX and Magix grew by S$74 million or 46.3%. Total Internet-related revenues amounted to just over S$230 million, and comprise about 19% of total public data and private network services operating revenues. SingNets revenue grew strongly at 44.5% as it shifted its focus from dial up customers to high value corporate customers. The revenue for SingTel IX also recorded good growth as demand for regional traffic continued to increase. Monthly ARPU for Magixs 30,000 subscribers increased to slightly over S$100 from S$90 last year. Mobile communications Mobile communications revenue grew by 4.0% to S$886 million. This growth was mainly due to strong growth of 10.8% in operating revenues from cellular services. Operating revenue from paging services, on the other hand, declined by 24.5% as demand for paging services continued to be replaced by demand for cellular services. SingTel benefited from increased demand for its cellular services resulting from advertising and promotional activities. In spite of the entry of Singapores third cellular operator on 1 April 2000, SingTels cellular subscriber base grew by a record half a million subscribers over the year to 1.5 million subscribers, reflecting a 45% increase. The large increase in the number of subscribers caused a decline in monthly post-paid ARPU to around S$83. Overall ARPU declined to approximately S$60 as a result of a higher proportion of pre-paid subscribers in SingTels overall subscriber base. National telephone Operating revenue from national telephone services grew by 2.7% to S$588 million. The total number of working Direct Exchange Lines grew 3.6% to 1.94 million lines. Operating revenue from enhanced network services increased 8.4% to S$126 million, and comprised approximately 20% of operating revenue from national telephone services. IT and engineering services IT and engineering services saw strong operating revenue growth of 25.2% to S$480 million. The growth was driven by strong demand for systems integration, technical consulting and information services. Postal services Operating revenue from postal services was S$341 million, a 5.7% increase. Postal services contributed 7% to SingTels total operating revenue. Growth in operating revenues was driven by a 4.4% increase in mail volume and an increase in the national postal rates. Operating expenses Overall operating expenses increased marginally by 0.8%. The average number of staff increased by 5.8% during the year. This, and overall wage increases, combined with the increase of employers CPF contributions from 10% to 12% in April 2000 and to 16% from January 2001, led to an increase in staff costs of 12.0% to S$667 million. Staff costs accounted for 22% of operating expenses and became the largest cost component of operating expenses. The increase in staff numbers was largely due to an increased focus on customer service and to increased activity in SingTels public data and private network and IT and engineering businesses and SingTels focus on these growth areas. The second largest cost component of operating expenses (previously the largest cost component), traffic expenses, decreased 5.1% to S$665 million. The cost of carrying traffic continued to decline as a result of aggressive settlement rate negotiations, resulting in the average outpayment rate falling by 23.0%.
54
S I N G T E L A N D I T S S T R AT E G Y
Lower accelerated depreciation led to a fall of 20.3% in depreciation charges to S$624 million. Cost of sales rose 31.0% to S$462 million, higher than the increase in revenue from sales of equipment and IT and engineering services as margins came under pressure with keen competition. Selling and administrative costs increased by 12.5% to S$592 million largely on account of more sales promotions, higher commission expenses and increased spending on property related expenses. Profit As a result of the slight overall increases in both revenues and costs outlined above, operating profit increased by S$36 million or 1.9%. SingTel also recognised S$337 million in compensation from the IDA. Total compensation of S$2.36 billion was paid by the IDA in two separate payments (each relating to a separate licence modification) of S$1.5 billion in 1997 and S$859 million in the current financial year. The compensation was paid to SingTel for the early liberalisation of the Singapore telecommunications market. In accordance with Singapore GAAP, SingTels policy is to recognise this compensation in equal instalments over seven years from 1 April 2000 to reflect the period by which SingTels monopoly was shortened. SingTels share of pre-tax profits of Associated Companies fell by 5.1% to S$349 million. This decline was caused by foreign exchange translation losses by Globe Telecom and negative contributions from certain new start-ups and ventures. Despite this decline, international investments remained a significant contributor to SingTels earnings, contributing 11% of profit before tax. Improved operating profit, together with the recognition of the IDA compensation and significant contributions from overseas investments resulted in increases in EBITDA of 8.3% to S$3.29 billion and EBIT of 18.3% to S$2.67 billion. Net financial income rose 44.9% to S$385 million primarily as a result of increases in investment income. Investment income rose as a result of gains realised on venture investments of S$125 million. Profit after tax before extraordinary items grew 26.4% to S$2.32 billion. Earnings per share before extraordinary items increased 25.5% to 15.06 cents. Extraordinary items resulting in losses of S$318 million were recognised during the year. These extraordinary items were primarily net provisions of S$370 million for diminution in value of certain long term investments, partially offset by other gains of S$52 million. Profit after tax and extraordinary items was approximately S$2.01 billion, a 21% decrease from the previous year, due to the extraordinary items recognised during the year. Earnings per share after extraordinary items fell from 16.58 cents to 13.00 cents. Financial position As at 31 March 2001, SingTels total assets were S$16.2 billion, up S$2.2 billion or 16.1%. The increase in total assets was accounted by higher cash and new investments in Associated Companies. The increase in SingTels assets included an increase of 23.5% in SingTels property, plant and equipment net of depreciation to S$5.5 billion. Capital expenditure during the year totalled S$1.7 billion, a significant increase from last year, with the addition of C2C, a 59.5% subsidiary which invested in new cable networks. C2Cs capital expenditure for the year was slightly over S$900 million. Cash and short term investments increased 12.2% to S$6.6 billion due to the S$1 billion bond issue of in March 2001. SingTels Shareholders funds were S$8.07 billion, down S$504 million or 5.9% from 31 March 2000. Although strong cash flows were generated from operations, there were dividends totalling S$1.5 billion, relating to special dividends of S$861 million paid in January 2001 and proposed final dividends of approximately S$640 million. A net goodwill charge of just over $800 million from the acquisition of certain international investments also caused a decline in shareholders funds. Net tangible assets per share at 52.33 cents was 3.05 cents or 5.5% lower than a year ago.
55
S I N G T E L A N D I T S S T R AT E G Y
1 Aug 2000
1 Nov 2000
1 Feb 2001
56
SECTION 4
THE ACQUISITION OF OPTUS
57
58
16.5%
39.5% S$11.4bn
24.6%
Singapore
Overseas
Optus
(1) Includes proportionate share of operating revenue from SingTels international investments. (2) Includes proportionate share of subscribers from SingTels international investments (excluding Belgacom).
The above chart sets out certain pro-forma post-acquisition operating statistics for SingTel for the year ended 31 March 2001. For further details of the pro-forma financial impact on SingTel of the acquisition, see Sections 4.6 to 4.9.
59
Australia Optus
Through the addition of Optus 3.7 million cellular subscribers as at 31 March 2001, SingTel and its Associated Companies would have a total of 10.9 million cellular subscribers in the region. SingTel and AIS are market leaders in their respective countries. Globe Telecom is the number two cellular operator in the Philippines. Bharti Group is among the top five cellular service providers in India, and one of the leading cellular service providers in the geographical areas in which it operates in India. Optus has the number two market position in Australia, with a 33% market share. Adjusting the above aggregate subscriber base for SingTels percentage ownership in its Associated Companies (and assuming SingTel acquires 100% of Optus), SingTels proportionate cellular subscriber base would be 6.9 million subscribers as at 31 March 2001. Such scale is expected to bring potential cost advantages, including lower equipment costs from greater bargaining power with equipment suppliers. SingTel, its Associated Companies and its regional partners continually work towards joint initiatives that would enhance the value of their respective businesses. Optus would also benefit from these regional initiatives, such as enhanced roaming and mobile enterprise solutions for corporates and multi-cultural and multi-lingual content development. SingTel also believes that product development savings may be achieved through initiatives for the joint development of mobile communications services across the various cellular operations in the different markets. Given that SingTel and Optus already have joint ventures with the Virgin Group, there may also be opportunities to enhance the value of these existing relationships, with the potential to expand operations into certain other markets in Asia.
60
to USA > JAPAN KOREA Chikura CHINA Shanghai to Hawaii/USA > to USA > to USA > to USA > Okinawa to USA >
TAIWAN
Guam
BRUNEI
APC APCN China-US Cable Japan-US Cable SEA-ME-WE3 APCN 2 (3Q 2001 ) C2C Phase 1 (3Q 2001) C2C Phase 2 (4Q 2001) i2i (1Q 2002) Branching unit Landing point Domestic network (under construction) Domestic network Satellite
B1 o 160 E
A3 o 164 E
Jakarta
INDONESIA
Pacrim West
Townsville
to New Zealand, Fiji, Hawaii & USA > Southern Cross to New Zealand > Tasman 2
Perth Adelaide
Launceston Hobart
Source: SingTel network infrastructure - SingTel, Optus network infrastructure - Optus Information Memorandum.
61
The acquisition would bring together international connectivity (both within Asia and to Europe and North America) and domestic backhaul in certain key Asia Pacific markets. In particular: the complementary networks of Optus, SingTel and SingTels Associated Companies could provide increased growth opportunities, as SingTel and Optus would be able to offer their existing and new value-added services over a greater area providing an enhanced value proposition to their customers; as SingTels and Optus existing networks are complementary, there is potential to reduce bandwidth costs by sourcing more capacity from internal networks, and by channelling traffic more efficiently within the enlarged network; and the scale of SingTels and Optus combined data network businesses could create potential to achieve procurement savings through increased bargaining power with network and content suppliers.
(d) Enhancement of management expertise and skill Optus has an experienced management team which has demonstrated its ability to create a highly successful integrated communications service provider in a competitive market. SingTel believes that the experience of the Optus management team in developing new products, brand management and technical innovation will increase and complement the SingTel management teams success in Singapore and elsewhere in the Asia Pacific region. The combined talent pool will enhance SingTels ability to deploy experienced management between Optus, SingTel and regional operations, thereby improving their ability to compete in their respective markets. (e) Potential enhancement of Optus financial strength and flexibility Following the acquisition, it is expected that Optus credit position could be enhanced as a result of SingTels financial position. The decisions of Standard & Poors and Moodys Investor Services to place Optus on credit watch for possible upgrade since the announcement of SingTels proposed acquisition of Optus indicates that Optus ability to access capital markets to meet its funding needs could potentially be strengthened. (f) Enhancement of SingTels ability to further its regional expansion strategy SingTel believes that its size and scale resulting from the acquisition of Optus, including the expansion of the coverage of its cellular and data networks in the Asia Pacific region, the mix of management experience as both an incumbent and a competitive communications service provider, and the financial strength and flexibility achieved through the acquisition, would enhance SingTels ability to make further acquisitions in the region and potentially to enter into alliances with other communications companies. (g) Potential improvement in liquidity of SingTel Shares Following the issue of SingTel Shares to Optus Shareholders who accept SingTels Offer, SingTel will have a greater number of shares on issue. This has the effect of diluting the stake in SingTel held by Temasek and increasing the free public float of SingTel Shares.
62
78%
(1) Assumes 100% acceptance level with C&W plc electing the Share, Cash and Bond Alternative and the remaining shareholders electing the Share and Cash Alternative.
As illustrated in the above chart, it is expected that the liquidity of SingTels Shares subsequent to the acquisition will be improved. It is also expected that such liquidity will also be enhanced by the listing of SingTel Shares on the ASX.
The statements of intention set out in this Section 4.4 are based on the facts and information concerning Optus and the circumstances affecting Optus business activities that are known to SingTel Australia at the date of this Bidders Statement. They have been formed with the benefit of a review of certain limited information about Optus business activities made available by Optus during SingTels due diligence review of Optus prior to the announcement of the Offer. (This information is either in the public domain, or is disclosed in this Bidders Statement or in the Targets Statement, or is not material to the making of a decision by an Optus Shareholder whether or not to accept the Offer.) However, as SingTel Australia does not currently have access to all material information, facts and circumstances which are necessary to assess the operational, commercial, taxation and financial implications of its current intentions, final decisions on these matters have not been made. After completion of the acquisition of Optus, SingTel Australia will conduct a review of the activities, assets and employees of Optus in light of the information which then becomes available to it. Final decisions will only be reached after that review and in the light of all material facts and circumstances. The contents of this Section 4.4 should be read against this background. The intentions of SingTel Australia set out in this Section 4.4 are also those of SingTel. (a) SingTel Australias intentions if it acquires 100% ownership of Optus If SingTel Australia receives acceptances of its Offer in respect of 90% or more of Optus Shares, it will be entitled to compulsorily acquire outstanding Optus Shares. SingTel has agreed with Optus in the Implementation Agreement that it will proceed with Compulsory Acquisition immediately upon it becoming entitled to do so. This will include Compulsory Acquisition of all Optus Shares that may be issued to Optus employees under the existing EOP and SPP, as described below in Section 4.4(a)(viii) up to six weeks after notice of Compulsory Acquisition has been given.
63
64
65
66
67
In addition, a limited sensitivity analysis, reflected in Scenario 2a and Scenario 2b, has been prepared. That analysis sets out the impact on certain post-acquisition pro-forma statistics of SingTel had certain assumptions made in Scenario 2 been modified. Both Scenarios 1 and 2 assume C&W plc (through CWAP) accepts the Offer in respect of its entire 52.5% shareholding in Optus, and elects to receive the Share, Cash and Bond Alternative. Although CWAP has agreed, if it accepts the Offer, to elect to receive the Share, Cash and Bond Alternative, these assumptions might not reflect the actual situation at the close of the Offer, nor do they necessarily reflect any intention of C&W plc (through CWAP) to accept the Offer for more than the equivalent of 19.8% of the total Optus Shares outstanding, which it has committed to do under the Pre-Bid Agreement. The Pro-forma Consolidated Financial Information has been prepared from, and should be read in conjunction with, the historical financial statements of SingTel and Optus included in Annexure 1 to this Bidders Statement and in the Targets Statement respectively. The Pro-forma Consolidated Financial Information is provided for illustrative purposes only. It does not purport to represent what the actual results of operations or financial position of SingTel would have been had the acquisition of Optus occurred on the dates assumed, nor is it necessarily indicative of SingTels future consolidated operating results, financial position or cash flows. The Pro-forma Consolidated Financial Information has been reviewed by PricewaterhouseCoopers. The text of PricewaterhouseCoopers Independent Accountants Report on the Pro-forma Consolidated Financial Information appears in Section 4.9. (b) Basis of preparation The Pro-forma Consolidated Financial Information has been prepared to illustrate the pro-forma consolidated operating results, financial position and cash flows of SingTel as if SingTel Australia had acquired Optus Shares with effect from: 31 March 2000 for the purposes of presenting the Pro-forma Consolidated Income Statement and the Pro-forma Consolidated Cash Flow Statement; and
68
(c) Significant accounting policies The financial information of SingTel under Singapore GAAP has been prepared based on the significant accounting policies as disclosed in the historical financial statements of SingTel included in Annexure 1 to this Bidders Statement. The Pro-forma Consolidated Financial Information has been prepared in accordance with SingTels accounting policies under Singapore GAAP, which differ in certain respects from Optus accounting policies which are prepared in accordance with Australian GAAP. A description of the principal differences is set out in Section 4.8. An initial assessment has been made of the impact on Optus financial statements of the application of SingTels accounting policies and Singapore GAAP. A complete assessment has not been made as SingTel will not have available to it sufficient information on the exact nature of Optus implementation of its accounting policies for this purpose until after completion of the acquisition. The reclassifications and adjustments made to the Optus Financial Information will not necessarily be adopted in preparing Optus Financial Statements in the future. As an Australian entity, Optus may continue to prepare its accounts in accordance with its existing accounting policies under Australian GAAP. For the purposes of presenting the Pro-forma Consolidated Financial Information, the Optus Financial Information has been reclassified to conform with SingTels presentation under Singapore GAAP, and pro-forma adjustments have been made to the Optus Financial Information to account for the significant differences identified between Optus and SingTels respective accounting policies. These adjustments are described in Section 4.7 below. These reclassifications and adjustments are not necessarily in accordance with future Optus presentations. (d) Consolidation SingTel will account for its acquisition of Optus as an acquisition under Singapore GAAP. Under this method of accounting, the excess of the fair value of the Offer Consideration over the interest acquired by SingTel in the fair value of the identifiable assets and liabilities of Optus as at the date of acquisition represents goodwill on consolidation. Goodwill on consolidation is recognised as an intangible asset and amortised on a straight line basis over 20 years. The date of acquisition for accounting purposes is the date the Offer becomes unconditional. SingTel will record the identifiable assets and liabilities of Optus at their fair values as at the date of acquisition. However, until conclusion of the Offer, SingTel will not have sufficient information to enable it to ascertain the fair values of these identifiable assets and liabilities, especially the identifiable assets for which there is no active market. Accordingly, for the purposes of preparing the Pro-forma Consolidated Financial Information, the excess of the Offer Consideration over SingTels interest in the book values of Optus net assets has been provisionally assigned to goodwill on consolidation until SingTel has full access to the Optus Financial Information. For the purposes of SingTels accounting for its acquisition of Optus under Singapore GAAP, the fair value of the Offer Consideration will comprise: the fair value of the SingTel Shares issued, based on their quoted price as at the date of acquisition; the fair value of the Offer Consideration paid in the form of cash and SingTel Bonds, translated at the prevailing S$/US$ and S$/A$ exchange rates on the date of acquisition, after taking into account any foreign exchange hedging contracts entered into prior to that date; and the expenses directly attributable to the acquisition.
The fair value of the Offer Consideration set out above cannot be determined until after the date of acquisition. For the purposes of preparing the Pro-forma Consolidated Financial Information, the cost of acquisition is assumed to be as follows: the fair value of the SingTel Shares to be issued is based on the SingTel Share price of S$1.82 as at close of trading on the SGX-ST on 30 April 2001; the fair value of the Offer Consideration paid in the form of cash and SingTel Bonds is translated at the S$/US$ and S$/A$ exchange rates on 30 April 2001 of S$1.8180/US$1 and S$0.9262/A$1 respectively, and after taking into account any foreign exchange hedging contracts up to that date; and
69
The Optus Financial Information expressed in A$ has been translated into S$ for the purposes of preparing the Pro-forma Consolidation Financial Information using the following exchange rates: income statement and cash flow statement have been translated at the average rate for the year ended 31 March 2001: S$0.9676/A$1; and balance sheet items have been translated at the 31 March 2001 year-end rate: S$0.8822/A$1.
(e) Scenario 1 (i) Key assumptions The following assumptions have been used to compile the Pro-forma Consolidated Financial Information for Scenario 1. Alternative chosen by accepting Optus Shareholders It is assumed under Scenario 1 that C&W plc accepts the Offer in respect of its entire 52.5% shareholding in Optus and chooses the Share, Cash and Bond Alternative. It is further assumed under Scenario 1 that no other Optus Shareholders accept the Offer. Cost of acquisition It is assumed under Scenario 1 that, consistent with the Pre-Bid Agreement, C&W plc will receive cash in US$ at the fixed exchange rate of US$0.4940/A$1, in lieu of SingTel Shares. The following table summarises the total cost of acquisition under Scenario 1. The actual mechanism through which the Optus Shareholders receive additional cash and SingTel Bonds in lieu of SingTel Shares is set out in Section 9.5 of this Bidders Statement.
CONSIDERATION IMPLIED PAID AFTER VALUE OF (3) SUBSTITUTION CONSIDERATION (4) A$ US$ S$ MILLION MILLION MILLION
(1)
SUBSTITUTION A$ MILLION
(2)
SingTel Shares Cash SingTel Bonds Total Estimated transaction costs Cost of acquisition
(1) Base case: The cost of acquisition reflects C&W plcs choice of the Share, Cash and Bond Alternative. (2) Substitution: Shows the effect on the cost of acquisition upon substitution of SingTel Shares for additional cash and SingTel Bonds. (3) Consideration paid after substitution: Shows the consideration payable in US$ via cash and SingTel Bonds, translated at the fixed exchange rate of US$0.4940/A$1. (4) Implied value: Shows the total cost of acquisition in S$, translated at the S$/US$ exchange rate on 30 April 2001 of S$1.8180/US$1 adjusted for the effect of foreign exchange hedging contracts up to that date.
The above implied values of the cash and SingTel Bonds components of the Offer Consideration in S$ may vary depending upon movements in exchange rates in the period up to the date of acquisition. The above computation is based on 3,774.0 million Optus Shares issued as at 31 March 2001. It does not include any Optus Shares that have been or may be issued from 1 April 2001 to the end of the Offer Period, details of which are set out in Section 11.2(a) of this Bidders Statement. Financing the acquisition and acquisition funding costs The acquisition of Optus Shares will be financed by newly issued SingTel Shares, SingTels cash reserves and additional long term debt, as well as newly issued SingTel Bonds. The assumed funding under Scenario 1, used for the Pro-forma Consolidated Financial Information, is as follows:
C O S T O F A C Q U I S I T I O N F U N D E D B Y: I M P L I E D VA L U E S$ MILLION
SingTel Shares SingTels cash reserves SingTels new long term debt SingTel Bonds
For pro-forma purposes, cost of acquisition is assumed to be funded by SingTels cash reserves comprising S$3,637.3 million from cash and cash equivalents and S$827.3 million from short term investments. For the purposes of the pro-forma consolidation, funding costs are assumed to be S$323.3 million, including S$176.8 million reduction in interest and investment income due to cash reserves being utilised. Synergies No synergistic benefits have been factored into the Pro-forma Consolidated Financial Information.
70
Operating revenue Operating expenses Operating profit Compensation from IDA Other income
4,904.4 (4,443.9) 460.5 460.5 65.0 55.0 (154.5) 426.0 (1.5) 424.5 (0.7) 423.8 423.8
4,745.5 (4,299.9) 445.6 445.6 62.9 53.2 (149.5) 412.2 (1.5) 410.7 (0.7) 410.0 410.0
(230.5) (326.6)
9,431.8 (7,712.8) 1,719.0 337.0 178.2 2,234.2 357.8 (93.4) 257.6 (346.2) 2,410.0 (637.4) 1,772.6 10.4 1,783.0 (308.7) 1,474.3
9,747.6 (7,971.1) 1,776.5 348.3 184.2 2,309.0 369.8 (96.5) 266.2 (357.8) 2,490.7 (658.7) 1,832.0 10.7 1,842.7 (319.0) 1,523.7
Share of results of associated companies 357.8 joint venture companies (8.9) Abnormal items Interest and investment income 393.6 Interest on borrowings (9.1) Profit on ordinary activities before tax 3,052.2 Taxation (715.1) Profit after tax 2,337.1 Minority interests (12.9) Profit before extraordinary items 2,324.2 Extraordinary items (317.9) Profit attributable to SingTel Shareholders 2,006.3
(147.4) (53.2) 49.8 (41.1) (185.8) (146.5) 79.2 24.0 17.6 (8.4) (942.0)
(1) The Optus Income statement expressed in A$ has been translated into S$ for consolidation at the average rate for the year ended 31 March 2001 of S$0.9676/A$1. For illustrative purposes, the post acquisition Pro-forma Consolidated Income Statement expressed in S$ has been translated into A$ at the same average rate. (2) Reclassification: Pro-forma reclassification of Optus Financial Information prepared under Australian GAAP to conform with SingTels presentation. (3) Pro-forma Adjustments comprise (a) Pro-forma GAAP adjustments to restate Optus Financial Information prepared under Australian GAAP (Aust GAAP) to conform with SingTels accounting policies under Singapore GAAP (Sing GAAP); and (b) Pro-forma consolidation adjustments to give effect to the goodwill and funding costs arising from the acquisition of Optus by SingTel, and the minority interests share of Optus results. An explanation of these adjustments is set out in Section 4.7.
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Current assets Cash and cash equivalents Short term investments Trade and other debtors Inventories
278.6 1,636.7 73.4 1,988.7 6,898.4 1,073.4 19.3 42.6 911.7 8,945.4 10,934.1 (1,878.5) (100.2) (1,978.7) (292.7) (23.2) (3,262.3) (3,578.2) (5,556.9) 5,377.2 5,305.5 71.7 5,377.2 5,377.2
245.7 1,443.9 64.8 1,754.4 6,085.8 947.0 17.0 37.6 804.3 7,891.7 9,646.1 (1,657.2) (88.4) (1,745.6) (258.2) (20.5) (2,878.0) (3,156.7) (4,902.3) 4,743.8 4,680.5 63.3 4,743.8 4,743.8
(3.2) (4.7)
703.8 1,706.0 2,295.0 165.1 4,869.9 11,227.9 6,094.6 1,637.2 260.5 819.8 225.6 20,265.6 25,135.5 (4,200.9) (88.4) (596.5) (640.0) (5,525.8)
797.7 1,933.8 2,601.5 187.1 5,520.1 12,727.2 6,908.4 1,855.8 295.3 929.3 255.7 22,971.7 28,491.8 (4,761.8) (100.2) (676.2) (725.5) (6,263.7)
Non-current assets Property, plant and equipment 5,475.8 Intangible assets Associated companies 1,637.2 Joint venture companies 231.0 Long term investments 782.2 Other non-current assets 64.0 8,190.2 Total assets 16,152.6 Current liabilities Trade and other creditors (2,570.6) Borrowings Current income tax (596.5) Proposed final dividend (640.0) (3,807.1) Non-current liabilities Deferred income tax (778.1) Trade and other creditors Borrowings (1,000.0) Deferred income (2,051.4) (3,829.5) Total liabilities (7,636.6) Net assets 8,516.0 Share capital and reserves Share capital 2,312.0 Reserves 5,753.7 Interests of SingTel shareholders 8,065.7 Minority interests 450.3 8,516.0
26.9
258.2
(778.1) (882.0) (20.5) (23.2) (2,607.0) (6,485.0) (7,350.9) (257.5) (2,308.9) (2,617.2) (9,592.5) (10,873.3) (15,118.3) (17,137.0) 10,017.2 11,354.8 (4,680.5) (63.3) 1,501.2 2,312.0 5,753.7 8,065.7 1,951.5 10,017.2 2,620.7 6,522.0 9,142.7 2,212.1 11,354.8
(1) The Optus Balance Sheet expressed in A$ has been translated into S$ for consolidation at the 31 March 2001 exchange rate of S$0.8822/A$1. For illustrative purposes, the post acquisition Pro-forma Consolidated Balance Sheet expressed in S$ has been translated to A$ at the same rate. (2) Reclassification: Pro-forma reclassification of Optus Financial Information prepared under Australian GAAP to conform with SingTels presentation. (3) Pro-forma Adjustments comprise (a) Pro-forma GAAP adjustments to restate Optus Financial Information prepared under Australian GAAP (Aust GAAP) to conform with SingTels accounting policies under Singapore GAAP (Sing GAAP); and (b) Pro-forma consolidation adjustments to give effect to the goodwill and funding costs arising from the acquisition of Optus by SingTel, and the minority interests share of Optus net assets. An explanation of these adjustments is set out in Section 4.7.
72
Net profit before tax Extraordinary items Adjustments for: Depreciation and amortisation Compensation from IDA Share of results of joint ventures and associates Net gain from sale of property, plant and equipment Profit on sale of investments Interest and investment income Provision for investment Interest expense Others Operating cash flow before working capital changes Changes in working capital
3,052.2 (317.9) 2,734.3 622.5 (337.0) (348.9) (30.6) (52.0) (393.6) 389.4 9.1 (19.4) (160.5) 2,573.8 631.7 3,205.5
407.7 18.3 426.0 809.5 (65.0) (87.8) (18.3) (51.5) 197.0 21.6 805.5 1,231.5 (219.0) 1,012.5 154.0 (1.5) 1,165.0
394.6 17.6 412.2 783.3 (62.9) (85.0) (17.7) (49.8) 190.6 20.8 779.3 1,191.5 (211.9) 979.6 149.0 (1.5) 1,127.1
(1,036.8)
2,410.0 (300.3) 2,109.7 1,682.6 (337.0) (264.4) (115.6) (69.7) (257.6) 389.4 346.2 (2.8) 1,371.1 3,480.8 739.2 4,220.0 192.0 (8.1) (567.4) 859.0 4,695.5
2,490.7 (310.4) 2,180.3 1,739.0 (348.3) (273.3) (119.5) (72.0) (266.2) 402.4 357.8 (2.9) 1,417.0 3,597.3 764.0 4,361.3 198.4 (8.4) (586.4) 887.8 4,852.7
276.8 147.4
319.4
Dividend received from joint ventures and associates 43.0 Interest paid (8.1) Income tax paid (565.9) IDA compensation received 859.0 Cash Flows from Operating Activities 3,533.5 Cash Flows from Investing Activities Net investment in subsidiaries, joint ventures, associates and long term investments (1,220.0) Purchase of property, plant and equipment and intangible assets (1,762.0) Sale of property, plant and equipment 97.5 Net investment in short term investments (782.5) Funds from minority shareholders 367.1 Interest and dividends received 247.8 Others (3,052.1) Cash Flows from Financing Activities Dividends paid to shareholders (1,493.8) Net borrowings 900.0 Repurchase of shares (142.3) Interest paid Others 19.4 (716.7) Net change in cash and cash equivalents (235.3) Cash and cash equivalents at beginning of year 4,330.7 Exchange difference Cash and cash equivalents at end of year 4,095.4
(65.9) (2,054.2) 200.6 33.6 (9.3) (1,895.2) 1,056.0 (203.1) 852.9 122.7 155.9 278.6
(63.8) (1,987.6) 194.1 32.5 (9.0) (1,833.8) 1,021.8 (196.5) 825.3 118.6 150.3 (23.2) 245.7 (34.9) (4.8) (172.0)
(1,283.8) (3,784.5) 291.6 (787.3) 367.1 108.3 (9.0) (5,097.6) (1,493.8) 1,921.8 (142.3) (343.0) 19.4 (37.9) (440.0) 843.7 (23.2) 380.5(4)
(1,326.8) (3,911.1) 301.4 (813.7) 379.4 111.9 (9.3) (5,268.2) (1,543.8) 1,986.2 (147.1) (354.5) 20.0 (39.2) (454.7) 875.1 10.9 431.3
(146.5)
(1) The Optus Cash Flow statement expressed in A$ has been translated into S$ for consolidation at the average rate for the year ended 31 March 2001 of S$0.9676/A$1. For illustrative purposes, the post acquisition Pro-forma Consolidated Cash Flow Statement expressed in S$ has been translated into A$ at the same average rate. (2) Reclassification: Pro-forma reclassification of Optus Financial Information prepared under Australian GAAP to conform with SingTels presentation. (3) Pro-forma Adjustments comprise (a) Pro-forma GAAP adjustments to restate Optus Financial Information prepared under Australian GAAP (Aust GAAP) to conform with SingTels accounting policies under Singapore GAAP (Sing GAAP); and (b) Pro-forma consolidation adjustments to give effect to the goodwill and funding costs arising from the acquisition of Optus by SingTel. An explanation of these adjustments is set out in Section 4.7. (4) For the purposes of the pro-forma cash flows, it is assumed that payment for SingTels acquisition of Optus took effect on 31 March 2000, and the associated interest costs were paid during the year ended 31 March 2001. Accordingly, the cash and cash equivalents of SingTel (Post Acquisition) is reduced by S$3,637.3 million being Offer Consideration to be paid out of SingTels existing cash and cash equivalents for Scenario 1; and S$323.3 million, being the pro-forma funding costs of the acquisition.
73
SingTel Shares Cash SingTel Bonds Total Estimated transaction costs Cost of acquisition SingTel Shares issued (million)
(1) Base case: The cost of acquisition reflects C&W plcs choice of the Share, Cash and Bond Alternative and the remaining Optus Shareholders choice of the Share and Cash Alternative. (2) Substitution: Shows the effect on the cost of acquisition of substitution of SingTel Shares for additional cash and SingTel Bonds by C&W plc, subject to the maximum limits under the Offer. (3) Consideration paid after substitution: Shows the consideration payable in A$ and US$ via cash and SingTel Bonds, with the US$ portions translated at the fixed exchange rate of US$0.4940/A$1. Also shows the A$ implied value of SingTel Share consideration. (4) Implied value: Shows the total cost of acquisition in S$ translated at the S$/US$ and S$/A$ exchange rates on 30 April 2001 of S$1.8180/US$1 and S$0.9262/A$1 respectively, adjusted for the effect of foreign exchange hedging contracts up to that date.
The above implied values of the SingTel Shares, cash and SingTel Bond components of the Offer Consideration in S$ may vary depending upon movements in the SingTel Share price and exchange rates in the period up to the date of acquisition. The above computation is based on 3,774.0 million Optus Shares issued as at 31 March 2001. It does not include any Optus Shares that have been or may be issued from 1 April 2001 to the end of the Offer Period, details of which are set out in Section 11.2(a) of this Bidders Statement. Financing the acquisition and acquisition funding costs The acquisition of Optus Shares will be financed by newly issued SingTel Shares, SingTels cash reserves and additional long term debt, as well as newly issued SingTel Bonds. The assumed funding under Scenario 2 used for the Pro-forma Consolidated Financial Information is as follows:
C O S T O F A C Q U I S I T I O N F U N D E D B Y: I M P L I E D VA L U E S$ MILLION
SingTel Shares SingTels cash reserves SingTels new long term debt SingTel Bonds
For pro-forma purposes, cost of acquisition is assumed to be funded by SingTels cash reserves comprising S$3,767.1 million from cash and cash equivalents and S$827.3 million from short term investments. For the purposes of the pro-forma consolidation, funding costs are assumed to be S$392.5 million, including S$181.5 million reduction in interest and investment income due to cash reserves being utilised. Synergies No synergistic benefits have been factored into the Pro-forma Consolidated Financial Information.
74
Operating revenue Operating expenses Operating profit Compensation from IDA Other income
4,904.4 (4,443.9) 460.5 460.5 65.0 55.0 (154.5) 426.0 (1.5) 424.5 (0.7) 423.8 423.8
4,745.5 (4,299.9) 445.6 445.6 62.9 53.2 (149.5) 412.2 (1.5) 410.7 (0.7) 410.0 410.0
(230.5) (538.8)
9,431.8 (7,925.0) 1,506.8 337.0 178.2 2,022.0 357.8 (93.4) 252.9 (410.7) 2,128.6 (620.4) 1,508.2 (13.6) 1,494.6 (300.3)
9,747.6 (8,190.4) 1,557.2 348.3 184.2 2,089.7 369.8 (96.5) 261.4 (424.5) 2,199.9 (641.2) 1,558.7 (14.1) 1,544.6 (310.4) 1,234.2
Share of results of associated companies 357.8 joint venture companies (8.9) Abnormal items Interest and investment income 393.6 Interest on borrowings (9.1) Profit on ordinary activities before tax 3,052.2 Taxation (715.1) Profit after tax 2,337.1 Minority interests (12.9) Profit before extraordinary items 2,324.2 Extraordinary items (317.9) Profit attributable to SingTel shareholders 2,006.3
17.6 (1,222.0)
1,194.3
(1) The Optus Income Statement expressed in A$ has been translated into S$ for consolidation at the average exchange rate for the year ended 31 March 2001 of S$0.9676/A$1. For illustrative purposes, the post acquisition Pro-forma Consolidated Income Statement expressed in S$ has been translated into A$ at the same average rate. (2) Reclassification: Pro-forma reclassification of Optus Financial Information prepared under Australian GAAP to conform with SingTels presentation. (3) Pro-forma Adjustments comprise (a) Pro-forma GAAP adjustments to restate Optus Financial Information prepared under Australian GAAP (Aust GAAP) to conform with SingTels accounting policies under Singapore GAAP (Sing GAAP); and (b) Pro-forma consolidation adjustments to give effect to the goodwill and funding costs arising from the acquisition of Optus by SingTel. An explanation of these adjustments is set out in Section 4.7.
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Current assets Cash and cash equivalents Short term investments Trade and other debtors Inventories
278.6 1,636.7 73.4 1,988.7 6,898.4 1,073.4 19.3 42.6 911.7 8,945.4 10,934.1 (1,878.5) (100.2) (1,978.7) (292.7) (23.2) (3,262.3) (3,578.2) (5,556.9) 5,377.2 5,305.5 71.7 5,377.2 5,377.2
245.7 1,443.9 64.8 1,754.4 6,085.8 947.0 17.0 37.6 804.3 7,891.7 9,646.1 (1,657.2) (88.4) (1,745.6) (258.2) (20.5) (2,878.0) (3,156.7) (4,902.3) 4,743.8 4,680.5 63.3 4,743.8 4,743.8
(3.2) (4.7)
650.5 1,933.8 2,601.5 187.1 5,372.9 12,727.2 11,718.7 1,855.8 295.3 929.3 255.7 27,782.0 33,154.9 (4,761.8) (100.2) (676.2) (725.5) (6,263.7)
Non-current assets Property, plant and equipment 5,475.8 Intangible assets Associated companies 1,637.2 Joint venture companies 231.0 Long term investments 782.2 Other non-current assets 64.0 8,190.2 Total assets 16,152.6 Current liabilities Trade and other creditors (2,570.6) Borrowings Current income tax (596.5) Proposed final dividend (640.0) (3,807.1) Non-current liabilities Deferred income tax (778.1) Trade and other creditors Borrowings (1,000.0) Deferred income (2,051.4) (3,829.5) Total liabilities (7,636.6) Net assets 8,516.0 Share capital and reserves Share capital 2,312.0 Reserves 5,753.7 Interests of SingTel shareholders 8,065.7 Minority interests 450.3 8,516.0
86.5 (363.7)
(333.7) 11,227.9 9,391.2 10,338.2 1,637.2 (74.0) 260.5 819.8 (279.0) 225.6 24,509.2 29,249.3 (4,200.9) (88.4) (596.5) (640.0) (5,525.8)
26.9
258.2
(778.1) (882.0) (20.5) (23.2) (3,904.6) (7,782.6) (8,821.8) (257.5) (2,308.9) (2,617.2) (10,890.1) (12,344.2) (16,415.9) (18,607.9) 12,833.4 14,547.0 (4,324.7) 3,898.3 2,667.8 9,715.3 12,383.1 450.3 12,833.4 3,024.0 11,012.6 14,036.6 510.4 14,547.0
(1) The Optus Balance Sheet expressed in A$ has been translated into S$ for consolidation at the 31 March 2001 rate of S$0.8822/A$1. For illustrative purposes, the post acquisition Pro-forma Consolidated Balance Sheet expressed in S$ has been translated to A$ at the same rate. (2) Reclassification: Pro-forma reclassification of Optus Financial Information prepared under Australian GAAP to conform with SingTels presentation. (3) Pro-forma Adjustments comprise (a) Pro-forma GAAP adjustments to restate Optus Financial Information prepared under Australian GAAP (Aust GAAP) to conform with SingTels accounting policies under Singapore GAAP (Sing GAAP); and (b) Pro-forma consolidation adjustments to give effect to the goodwill and funding costs arising from the acquisition of Optus by SingTel. An explanation of these adjustments is set out in Section 4.7.
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Net profit before tax Extraordinary items Adjustments for: Depreciation and amortisation Compensation from IDA Share of results of joint ventures and associates Net gain from sale of property, plant and equipment Profit on sale of investments Interest and investment income Provision for investment Interest expense Others Operating cash flow before working capital changes Changes in working capital
3,052.2 (317.9) 2,734.3 622.5 (337.0) (348.9) (30.6) (52.0) (393.6) 389.4 9.1 (19.4) (160.5) 2,573.8 631.7 3,205.5
407.7 18.3 426.0 809.5 (65.0) (87.8) (18.3) (51.5) 197.0 21.6 805.5 1,231.5 (219.0) 1,012.5 154.0 (1.5) 1,165.0
394.6 17.6 412.2 783.3 (62.9) (85.0) (17.7) (49.8) 190.6 20.8 779.3 1,191.5 (211.9) 979.6 149.0 (1.5) 1,127.1
(1,318.2)
2,128.6 (300.3) 1,828.3 1,894.8 (337.0) (264.4) (115.6) (69.7) (252.9) 389.4 410.7 (2.8) 1,652.5 3,480.8 739.2 4,220.0 192.0 (8.1) (567.4) 859.0 4,695.5
2,199.9 (310.4) 1,889.5 1,958.3 (348.3) (273.3) (119.5) (72.0) (261.4) 402.4 424.5 (2.9) 1,707.8 3,597.3 764.0 4,361.3 198.4 (8.4) (586.4) 887.8 4,852.7
489.0 147.4
319.4
Dividends received from joint ventures and associates 43.0 Interest paid (8.1) Income tax paid (565.9) IDA compensation received 859.0 Cash Flows from Operating Activities 3,533.5 Cash Flows from Investing Activities Net investment in subsidiaries, joint ventures, associates and long term investments (1,220.0) Purchase of property, plant and equipment and intangible assets (1,762.0) Sale of property, plant and equipment and intangible assets 97.5 Net investment in short term investments (782.5) Funds from minority shareholders 367.1 Interest and dividends received 247.8 Others (3,052.1) Cash Flows from Financing Activities Dividends paid to shareholders (1,493.8) Net borrowings 900.0 Repurchase of shares (142.3) Interest paid Others 19.4 (716.7) Net change in cash and cash equivalents (235.3) Cash and cash equivalents at beginning of year 4,330.7 Exchange difference Cash and cash equivalents at end of year 4,095.4
(65.9) (2,054.2) 200.6 33.6 (9.3) (1,895.2) 1,056.0 (203.1) 852.9 122.7 155.9 278.6
(63.8) (1,987.6) 194.1 32.5 (9.0) (1,833.8) 1,021.8 (196.5) 825.3 118.6 150.3 (23.2) 245.7 (34.9) (4.8) (176.7)
(1,283.8) (3,784.5) 291.6 (787.3) 367.1 103.6 (9.0) (5,102.3) (1,493.8) 1,921.8 (142.3) (407.5) 19.4 (102.4) (509.2) 713.9 (23.2) 181.5(4)
(1,326.8) (3,911.1) 301.4 (813.7) 379.4 107.1 (9.3) (5,273.0) (1,543.8) 1,986.2 (147.1) (421.1) 20.0 (105.8) (526.1) 740.5 (8.7) 205.7
(211.0)
(1) The Optus Cash Flow statement expressed in A$ has been translated into S$ for consolidation at the average rate for the year ended 31 March 2001 of S$0.9676/A$1. For illustrative purposes, the post acquisition Pro-forma Consolidated Cash Flow Statement expressed in S$ has been translated into A$ at the same average rate. (2) Reclassification: Pro-forma reclassification of Optus Financial Information prepared under Australian GAAP to conform with SingTels presentation. (3) Pro-forma Adjustments comprise (a) Pro-forma GAAP adjustments to restate Optus Financial Information prepared under Australian GAAP (Aust GAAP) to conform with SingTels accounting policies under Singapore GAAP (Sing GAAP); and (b) Pro-forma consolidation adjustments to give effect to the goodwill and funding costs arising from the acquisition of Optus by SingTel. An explanation of these adjustments is set out in Section 4.7. (4) For the purpose of the pro-forma cash flows, it is assumed that payment for SingTels acquisition of Optus took effect on 31 March 2000, and the associated interest costs were paid during the year ended 31 March 2001. Accordingly, the cash and cash equivalents of SingTel (Post Acquisition) is reduced by S$3,767.1 million, being Offer Consideration to be paid out of SingTels existing cash and cash equivalents for Scenario 2; and S$392.5 million, being the pro-forma funding costs of the acquisition.
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Total SingTel Shares (million) New SingTel Shares issued (million) Temasek shareholding (%) C&W plc shareholding in SingTel (%) Free float in SingTel (%)
Operating Cash Flows(1) before Net Interest(2) after Net Interest(2) EBITDA(3) EBIT(4) Net Income (before EI)(5) Net Income (after EI)(5) Net Debt(6) EBITDA per share (cents)(7) EPS pre-goodwill before EI (cents) after EI (cents) EPS post-goodwill before EI (cents) after EI (cents) EBITDA/Gross Interest EBITDA/Net Interest(2) Net Debt Gearing (%)(8)
(1) (2) (3) (4)
3,533.5 3,918.0 3,290.2 2,667.7 2,324.2 2,006.3 nm 21.32 15.06 13.00 15.06 13.00 361.56 nm nm
4,695.5 4,606.9 4,181.2 2,498.6 1,783.0 1,474.3 4,163.6 24.36 13.31 11.31 11.56 9.56 12.08 47.19 29
4,695.5 4,537.7 4,181.2 2,286.4 1,494.6 1,194.3 5,591.0 23.49 11.11 9.42 8.40 6.71 10.18 26.50 30
4,695.5 4,533.2 4,181.2 2,286.3 1,491.1 1,190.8 5,567.1 23.47 11.08 9.39 8.37 6.68 9.96 25.76 30
4,695.5 4,536.0 4,181.2 2,292.9 1,499.8 1,199.5 5,588.3 23.58 11.14 9.45 8.46 6.76 10.06 26.21 31
Operating Cash Flows refers to Cash Flows from Operating Activities in the Pro-forma Consolidated Cash Flow Statement. Net Interest is interest expense less interest and investment income. EBITDA refers to EBIT before depreciation and amortisation. EBIT refers to net profit before Net Interest and taxation, but after attribution of compensation income from IDA, and after share of results of associates and joint ventures. (5) Net Income refers to net profit after tax and after minority interests. (6) Net Debt comprises borrowings net of cash and cash equivalents and short term investments. (7) For the purpose of computing EBITDA per share for Scenario 1, minority shareholders 47.5% interest in Optus EBITDA has been excluded. (8) Net Debt Gearing is defined as the ratio of Net Debt to Net Capitalisation. Net Capitalisation comprises the aggregate of Net Debt, shareholders equity and minority interests. nm: not meaningful because cash and cash equivalents and short term investments exceed borrowings; and interest income exceeds interest expense. EPS: Earnings per share EI: Extraordinary items
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DESCRIPTION
Capacity sales and purchases (b) Customer acquisition costs (c) Capitalisation of overhead costs (d)(i) Partial depreciation of network assets (d)(iii) Amortisation of telecommunication licences (f) Others #
257.5 257.5
* The adjustment includes impact on share of joint venture companies results arising from the different accounting treatments relating to capacity sales and purchases. # Comprises (d)(ii), d(iv), (e) and (g).
The above pro-forma GAAP adjustments do not have any cash flow effect and hence do not impact Optus reported net cash flows. (ii) Pro-forma Consolidation Adjustments The adjustments to reflect the acquisition of Optus comprise the acquisition funding costs set out in Section 4.6 (e)(i) and (f)(i), and the pro-forma consolidation entries based on the following:
SCENARIO 1 SCENARIO 2
Number of SingTel Shares to be issued at S$1.82 per share (millions) Share capital at S$0.15 each Share premium at S$1.67 each SingTel Bonds and other borrowings Existing cash reserves Total acquisition cost Net book value of assets acquired(1) Pro-forma goodwill Annual amortisation over 20 years useful life
S$ MILLION
2,372.2
S$ MILLION
(1) Until the conclusion of the Offer, SingTel will not have sufficient information to enable it to ascertain the fair values of these assets. Accordingly, for the purpose of preparing the Pro-forma Consolidated Financial Information, the excess of the Offer Consideration over SingTels interest in the book values of Optus net assets has been provisionally assigned to goodwill.
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4.8 SIGNIFICANT DIFFERENCES BETWEEN SINGAPORE GAAP AND AUSTRALIAN GAAP, AND BETWEEN SINGTELS AND OPTUS ACCOUNTING POLICIES
(a) Introduction (i) The Pro-forma Consolidated Financial Information included in Section 4.6 of this Bidders Statement has been prepared and presented in accordance with Singapore GAAP and SingTels accounting policies (SingTel Policies), which differs in certain significant respects from Australian GAAP and Optus accounting policies (Optus Policies). An initial assessment has been made of the impact on Optus financial statements of the application of SingTels accounting policies and Singapore GAAP. A complete assessment has not been made as SingTel will not have available to it sufficient information on the exact nature of Optus implementation of its accounting policies for this purpose until after completion of the acquisition. Certain significant differences between SingTel Policies and Optus Policies, relevant to the Pro-forma Consolidated Financial Information are summarised below. (ii) The following is a list of new standards and revisions to existing standards which will be applicable in Singapore and Australia for the first time to the financial statements of SingTel and Optus, respectively, for the financial year beginning on or after 1 April 2001. The pro-forma consolidated financial information has not taken into account these new standards, except that the pro-forma goodwill arising from the acquisition of Optus by SingTel has been accounted for under Singapore Statements of Accounting Standards (SAS) 22 (Revised) in the Pro-forma Consolidated Financial Information. Singapore Effective for SingTel reporting periods beginning on or after 1 April 2001 SAS 8 (Revised) Net Profit or Loss, Fundamental Errors and Changes in Accounting Policies SAS 10 (Revised) Events After the Balance Sheet Date SAS 12 Income Taxes SAS 17 Employee Benefits SAS 22 (Revised) Business Combinations SAS 30 Interim Financial Reporting SAS 31 Provisions, Contingent Liabilities and Contingent Assets SAS 32 Financial Instruments: Disclosure and Presentation SAS 34 Intangible Assets SAS 35 Discontinuing Operations SAS 36 Impairment of Assets SAS 37 Information Reflecting the Effects of Changing Prices SAS 38 Financial Reporting in Hyperinflationary Economies Effective for SingTel reporting periods beginning on or after 1 April 2002 SAS 33 Financial Instruments recognition and measurement Australia Effective for Optus reporting periods beginning on or after 1 April 2001 AASB 1010 Recoverable Amount of Non-Current Assets AASB 1018 Statement of Financial Performance AASB 1034 Financial Report Presentation and Disclosure AASB 1037 Self-Generating and Regenerating Assets AASB 1040 Statement of Financial Position AASB 1041 Revaluation of Non-Current Assets Effective for Optus reporting periods beginning on or after 1 April 2002 AASB 1005 Segment Reporting AASB 1012 Foreign Currency Translation AASB 1027 Earnings Per Share AASB 1029 Interim Financial Reporting AASB 1042 Discontinuing Operations Effective for Optus reporting periods beginning on or after 1 April 2003 AASB 1020 Income Taxes No attempt has been made to identify future differences between Singapore GAAP and Australian GAAP as a result of prescribed changes in accounting standards, including those accounting standards listed above, that may affect the Pro-forma Consolidated Financial Information.
80
81
82
83
4.9 REPORT FROM PRICEWATERHOUSECOOPERS ON THE UNAUDITED PRO-FORMA CONSOLIDATED FINANCIAL INFORMATION
The Directors Singapore Telecommunications Limited SingTel Australia Investment Limited 31 Exeter Road, Comcentre SINGAPORE 239732
The Directors Singapore Telecommunications Limited SingTel Australia Investment Limited 31 Exeter Road, Comcentre SINGAPORE 239732
18 May 2001
18 May 2001
Subject: Independent Accountants Report on historical financial information Dear Sirs We have prepared this report on historical financial information of Singapore Telecommunications Limited (SingTel) for inclusion in a Bidders Statement dated on or about 18 May 2001 (the Bidders Statement) relating to the proposed offer by SingTel Australia Investment Limited to acquire Cable & Wireless Optus Limited (Optus). Expressions defined in the Bidders Statement have the same meaning in this report. Scope You have requested PricewaterhouseCoopers and PricewaterhouseCoopers Securities Ltd to prepare an Independent Accountants Report covering the unaudited Pro-forma Consolidated Financial Information set out in Section 4.6 comprising the Pro-forma Consolidated Income Statements, Balance Sheets and Cash Flow Statements of SingTel as if: Optus Shareholders holding 52.5% of the total Optus Shares outstanding accept the Offer (Scenario 1) Optus Shareholders holding 100% of the total Optus Shares outstanding accept the Offer (Scenario 2)
on the basis of the assumptions relating to the distribution of acceptances among the three Offer Consideration Alternatives detailed under each Scenario, together with a limited sensitivity analysis of variations to these assumptions. This report has been prepared for inclusion in the Bidders Statement. We disclaim any assumption of responsibility for any reliance on this report, or on the unaudited Pro-forma Consolidated Financial Information to which it relates, for any purposes other than for which it was prepared. Scope of review of historical financial information The unaudited Pro-forma Consolidated Financial Information has been extracted from the historical financial statements of SingTel and Optus, and incorporates such adjustments (the Pro-forma Adjustments) as the Directors considered necessary to reflect: (a) the differences arising as a result of preparing the financial statements of Optus under Singapore GAAP and in accordance with SingTels accounting policies. An initial assessment has been made of the impact on Optus financial statements of the application of SingTels accounting policies and Singapore GAAP. A complete assessment has not been made as SingTel will not have available to it sufficient information on the exact nature of Optus implementation of its accounting policies for this purpose until after completion of the acquisition.
84
These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Review statement on historical financial information Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that: the Pro-forma Adjustments do not form a reasonable basis for the preparation of the unaudited Pro-forma Consolidated Financial Information the unaudited Pro-forma Consolidated Financial Information set out in Section 4.6 of the Bidders Statement has not been properly prepared on the basis of the Pro-forma Adjustments.
Subsequent events Apart from the matters dealt with in this Report, and having regard to the scope of our Report, to the best of our knowledge and belief no material transactions or events outside of the ordinary business of the SingTel and Optus (to the extent of publicly available information) have come to our attention that would require comment on, or adjustment to, the information referred to in our Report or that would cause such information to be misleading or deceptive. Yours faithfully
PricewaterhouseCoopers, Singapore
85
86
SECTION 5
ACCEPTANCE CONSIDERATIONS FOR OPTUS SHAREHOLDERS
87
A C C E P TA N C E C O N S I D E R AT I O N S F O R O P T U S S H A R E H O L D E R S
Optus Shareholders should also carefully consider the other information contained in this Bidders Statement. If you are in any doubt as to how to deal with this Bidders Statement please consult your financial or other professional adviser.
88
A C C E P TA N C E C O N S I D E R AT I O N S F O R O P T U S S H A R E H O L D E R S
(b) Diversification of certain geographical and operating risks The risk profile and performance of SingTel is expected to be different from that of Optus on a stand-alone basis. The combination of diverse revenue streams and a strong presence in two developed markets in Singapore and Australia is expected to assist SingTel in maintaining greater stability in earnings and cash flows, without sacrificing substantial growth opportunities in developing markets. (c) Entitlement to receive dividends from SingTel As indicated in Sections 3.15 and 4.5(c), SingTel has a history of paying steady dividends. In its current growth phase, Optus has not yet paid a dividend. The income that may be derived from shares may fall as well as rise. Past performance is not necessarily a guide to future performance. Exchange rate movements may affect the value to shareholders of income denominated in S$.
89
A C C E P TA N C E C O N S I D E R AT I O N S F O R O P T U S S H A R E H O L D E R S
or unwilling to hold Optus Shares and may have to sell them on-market. With an increase in selling activity and a possible decrease in buying activity (for the same reasons), the price of Optus Shares may fall. (d) Possible Compulsory Acquisition of your Optus Shares If SingTel Australia becomes entitled to do so, SingTel Australia intends to exercise its right to compulsorily acquire all remaining Optus Shares that were not accepted into the Offer. If your Optus Shares are compulsorily acquired, you will receive the Offer Consideration later than Optus Shareholders who accept the Offer during the Offer Period.
90
SECTION 6
RISK FACTORS
91
RISK FACTORS
6.1 OVERVIEW
Optus Shareholders who accept the Offer will receive SingTel Shares as part of the consideration for their Optus Shares. Optus Shareholders who choose the Share, Cash and Bond Alternative will also receive SingTel Bonds. The financial performance and operations of SingTels businesses within and outside Singapore, the price of SingTel Shares and SingTel Bonds, and the amount and timing of any dividends that SingTel pays, will be influenced by a range of factors. Many of these factors are beyond the control of SingTel and the SingTel Board. Many of these factors also affect the businesses of other companies operating in the communications industry and in other industries, both within and outside Singapore. Optus Shareholders should consider carefully the risk factors set out below and the other information contained in this Bidders Statement.
92
RISK FACTORS
The operations of SingTels international businesses are also subject to highly competitive market conditions. There is a regional and global market for many of the services that SingTel provides, particularly international communications and data services offered to business customers. The quality of and rates for these services such as IDD, leased lines, ISDN, switched data, facilities management and other hubbing services, can affect a potential business customers decision to subscribe to SingTels services, locate or expand its offices or communications facilities in Singapore or to use Singapore as a transit hub for its communications. Prices for some of these services have shown significant declines in recent years and are anticipated to continue to decline at similar rates as a result of capacity additions and general price competition. In addition, many of SingTels international investments operate in highly competitive market environments and are subject to similar risks.
93
RISK FACTORS
94
RISK FACTORS
All rights attached to the Special Share will be surrended and the Special Share will be converted into an ordinary SingTel Share with effect from the amendment of SingTels Articles of Association which is to be considered at the EGM (as described in Section 8.3(b)(ii)). This surrender and conversion is not likely to affect significantly the ability of Temasek to control SingTel. Temasek also holds interests in certain companies which hold licences to operate telecommunications services in Singapore and which compete with SingTel, including StarHub and MobileOne. (b) Change of control There is no assurance that there will not be a change of control of SingTel or entry of another major shareholder with the ability to exert significant influence on the strategic direction or operations of SingTel, nor that SingTels business, financial position and performance would not adversely be affected by such a change in control or influence.
MONTH
November 2000 December 2000 January 2001 February 2001 March 2001 April 2001
New SingTel Shares to be listed on the ASX and the SGX-ST will be issued pursuant to the Offer, which may increase the liquidity of SingTel Shares. However, the number of SingTel Shares to be issued is uncertain (as it depends on the relative acceptance levels of the three Offer Consideration alternatives) and there is no assurance that there will be any changes in the liquidity of SingTel Shares after the Offer.
95
RISK FACTORS
Another factor affecting the liquidity of SingTel Shares is Temaseks controlling shareholding of approximately 78%. That percentage holding will be reduced after the issue of SingTel Shares pursuant to the Offer. The extent of the reduction depends on Optus Shareholder acceptances and the resultant number of new SingTel Shares issued pursuant to the Offer, but Temaseks shareholding will not be reduced below 65%. SingTels public float of shares that can be freely traded is therefore currently 22% and will be between 22% and 35% after the Offer. If there is a larger public float after the Offer, then it is possible (but not certain) that the liquidity of SingTel Shares will be greater than historical levels. Temasek has agreed that it will not dispose of any of its SingTel Shares for a period of six months after the close of the Offer (if C&W plc owns more than 3% of SingTel Shares) or for a period of three months after the close of the Offer (if C&W plc owns more than 1% but less than or equal to 3% of SingTel Shares). If C&W plc owns 1% or less of SingTel Shares, Temasek will not be restricted from disposing of its SingTel Shares. In certain circumstances, CWAP may have a shareholding in SingTel of up to 6%, which may further affect the liquidity of SingTel Shares. SingTel has agreed to assist CWAP in disposing of any SingTel Shares it may receive if it accepts the Offer by participating in roadshows and assisting in the preparation of offer documentation for a bookbuild offering of those SingTel Shares. If, after that bookbuild, CWAP owns less than 3% of SingTel Shares, it has agreed not to sell its SingTel Shares for three months. If, after that bookbuild, CWAP owns 3% or more of SingTel Shares, it has agreed not to sell its shares for six months. SingTel has also agreed under the Pre-bid Agreement that, subject to certain exceptions, if at the close of the Offer, C&W plc could hold more than 1% of the issued capital of SingTel, SingTel will not allot or issue any securities, including shares or options or any other form of equity in its capital or any instrument which is convertible into equity from 25 March 2001 until: (a) six months after the close of the Offer, if C&W plc could hold more than 3% of the issued capital of SingTel under the terms of the Transaction; or (b) three months after the close of the Offer, if C&W plc could hold more than 1% and not more than 3% of the issued capital of SingTel under the terms of the Transaction. To the extent that SingTel Shares are listed on the ASX after SingTels acquisition of Optus, their inclusion in the S&P/ASX 200 Index could have a material effect on the demand for and liquidity of, SingTel Shares, as certain institutional investors are more inclined to buy shares listed on the ASX if they are included in the S&P/ASX 200 Index. Whether SingTel will be included in the S&P/ASX 200 Index (and at what weighting) are decisions for the Australian Index Committee of the S&P/ASX 200 Index. Accordingly, the market price of SingTel Shares after the acquisition of Optus may be adversely affected by the lack of liquidity on the SGX-ST or the ASX. There is no assurance that particular SingTel Shareholders will be able to find buyers for SingTel Shares at favourable prices or at prices which approximate fair market prices.
96
RISK FACTORS
97
98
SECTION 7
TAXATION
99
TA X AT I O N
The tax implications of choosing the Transfer Alternative or the Buy-Back Alternative are different, as examined below. Under either alternative, you have the following three Offer Consideration alternatives (see Sections 2.1 and 9): the Share Alternative; or the Share and Cash Alternative; or the Share, Cash and Bond Alternative.
(a) Accepting the Transfer Alternative General comments The tax implications arising from a transfer of Optus Shares from you to SingTel will depend on the circumstances in which the Optus Shares are held by you. The comments below consider the situation where you hold your Optus Shares as a capital investment. It is recommended that where you hold your Optus Shares as trading stock or as part of an income generating arrangement, you should seek independent professional advice. For CGT purposes, a CGT event will occur when you dispose of your Optus Shares to SingTel under the Transfer Alternative. This should take place on the date of acceptance of the Offer. Any capital gain or loss from the CGT event will be worked out by comparing the Capital Proceeds received with the CGT cost base of the Optus Shares. The Capital Proceeds received by you will be equal to the sum of the following: the A$ cash component of the Offer Consideration received (if any); and the market value (in A$) on the day of acceptance of the Offer of the US$ Cash Alternative, SingTel Shares, SingTel Bonds and/or Unsecured Notes received (if any).
The Capital Proceeds received by you in respect of an Unsecured Note under the Share, Cash and Bond Alternative will be A$1.48 (rather than the value of any cash, SingTel Bonds or SingTel Shares which you receive on redemption of the Unsecured Note).
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TA X AT I O N
After you work out the relevant capital gain or loss arising, the resulting tax implications depend upon whether or not you are an Australian resident. (i) Non-Australian residents Capital gains or capital losses made by Optus Shareholders who are not residents of Australia and who hold less than 10% of the issued Optus Shares (by value in the five years prior to sale) will be disregarded. Non-resident shareholders holding more than 10% of the issued Optus Shares will be subject to CGT. They will not be eligible for CGT rollover relief (as described below), but could benefit from double tax treaty relief in some circumstances. (ii) Australian residents If you acquired your Optus Shares before 21 September 1999, the cost base of those shares may be indexed for inflation to 30 September 1999. Alternatively, if you have held your Optus Shares for at least one year, you should be entitled to a CGT concession. For individuals or trusts, this CGT concession is a 50% discount, and for complying superannuation funds, the CGT concession is a 33% discount. No CGT concession is available for companies. It is anticipated that the Australian Taxation Office will confirm, in a Class Ruling, that CGT rollover relief will be available for Optus Shareholders who choose the Transfer Alternative and either the Share Alternative or the Share and Cash Alternative, provided SingTel reaches the 80% ownership threshold. This CGT rollover relief would apply to the SingTel Share component of the Offer Consideration and is commonly termed scrip-for-scrip CGT rollover relief. The requirements for scrip-for-scrip CGT rollover relief are: an Optus Shareholder exchanges an Optus Share for a SingTel Share; the exchange is in consequence of a single arrangement which results in SingTel owning 80% or more of Optus and on the conditions that all Optus Shareholders could participate in the arrangement on substantially the same terms; the Optus Shares were acquired after 19 September 1985 (when CGT was introduced to Australia); CGT rollover relief will not apply if a capital loss eventuates; and the Optus Shareholder chooses to obtain the scrip-for-scrip CGT rollover relief.
The consequences of CGT rollover relief are that: any capital gain made from accepting the Transfer Alternative is disregarded; the Optus Shareholders CGT cost base in its Optus Shares is transferred into the SingTel Shares received in exchange; scrip-for-scrip CGT rollover relief is only available in respect of the SingTel Share component (and not in respect of any cash component) of the Offer Consideration. This has two implications: a capital gain or loss will still arise on the proportion of the Offer Consideration that is not made up of SingTel Shares (that is, the cash component of the Offer Consideration); and the Optus Shareholders CGT cost base which is transferred to the replacement SingTel Shares is proportionately reduced by the amount of the cash component (as it has already been used up in reducing the capital gain on the cash component); and when CGT rollover relief is applied to the SingTel Shares, the date of acquisition of these SingTel Shares in relation to the CGT discount factor, is the date of acquisition of the original Optus Shares.
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It should be noted that CGT rollover relief will not be available for the Share, Cash and Bond Alternative, as your Optus Shares are not exchanged for SingTel Shares but rather for cash, SingTel Bonds and Unsecured Notes (although SingTel Shares may subsequently be issued upon redemption of the Unsecured Notes). (iii) Table 1 Examples of the CGT implications under the Transfer Alternative The following examples will illustrate the CGT consequences for you if you choose the Transfer Alternative. The calculations in the following examples have been based on opening prices for Optus Shares and SingTel Shares and the S$/A$ exchange rate as at 8 May 2001. It is recommended that each Optus Shareholder should review their own position taking into account the current prices and exchange rates and their individual circumstances. Example 1 considers the position where you choose the Share Alternative. Example 2 considers the position where you choose the Share and Cash Alternative. An example based on the Share, Cash and Bond Alternative has not been provided. If this Offer Consideration alternative is chosen, the assumptions used to calculate these examples would change in respect of the value of the Offer Consideration. Example 1 Assumptions used It is assumed for the purposes of this example that you choose the Share Alternative, and that the Share Alternative is valued at A$2.95, based on opening prices for Optus Shares and SingTel Shares and the S$/A$ exchange rate as at 8 May 2001. Example 1 is based on the following assumptions. Offer Consideration A$2.95 CGT cost base (ignoring indexation) A$1.85(1) Tax rate for Australian resident individuals 48.5%(2) Tax rate for Australian resident superannuation funds 15% Tax rate for Australian resident companies 30%(3) Dividend withholding tax rate treaty country 15% Dividend withholding tax rate non-treaty country 30% CGT concession for individuals holding Optus Shares for at least one year 50% CGT concession for superannuation funds holding Optus Shares for at least one year 33%
(1) This was the buy-in price for retail investors when Optus was floated in 1998. (2) Includes Medicare levy of 1.5%. (3) 34% if the settlement date is within the taxpayers 2001 year of income.
CGT implications No scrip-for-scrip CGT rollover relief is chosen The following tables set out the Australian CGT implications for a range of Optus Shareholders that do not choose to obtain scrip-for-scrip CGT rollover relief. Individuals
AUSTRALIAN (50% CGT CONCESSION AVA I L A B L E ) A$ AUSTRALIAN NO CGT CONCESSION A$
FOREIGN A$
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Companies
AUSTRALIAN RESIDENT A$ FOREIGN-OWN > 1 0 % (1) O F OPTUS SHARES A$ FOREIGN-OWN <10% OF OPTUS SHARES A$
(1) It is assumed that no Treaty protection is available in these circumstances. As it is possible that Treaty protection from Australian CGT could apply, shareholders in these circumstances should seek their own tax advice.
Superannuation Funds
AUSTRALIAN (33% CGT CONCESSION AVA I L A B L E ) A$ AUSTRALIAN NO CGT CONCESSION A$
FOREIGN A$
The capital gain will be disregarded for foreign Optus Shareholders holding less than 10% of issued Optus Shares. However, the capital gain will be included in the assessable income of Australian resident shareholders, subject to the availability of any unrecouped capital losses carried forward and any applicable CGT concessions. Scrip-for-scrip CGT rollover relief is chosen In this situation, all of the capital gain of A$1.10 is disregarded as a result of scrip-for-scrip CGT rollover relief. Also, the CGT cost base in your Optus Shares is transferred to your replacement SingTel Shares. Example 2 Assumptions used It is assumed for the purposes of this example that you choose the Share and Cash Alternative, and that the Share and Cash Alternative is valued at A$3.67, based on opening prices for Optus Shares and SingTel Shares and the S$/A$ exchange rate as at 8 May 2001. Example 2 is also based on the following assumptions. Offer Consideration A$3.67 CGT cost base (ignoring indexation) A$1.85(1) Tax rate for Australian resident individuals 48.5%(2) Tax rate for Australian resident superannuation funds 15% Tax rate for Australian resident companies 30%(3) Dividend withholding tax rate treaty country 15% Dividend withholding tax rate non-treaty country 30% CGT concession for individuals holding Optus Shares for at least one year 50% CGT concession for superannuation funds holding Optus Shares for at least one year 33%
(1) This was the buy-in price for retail investors when Optus was floated in 1998. (2) Includes Medicare levy of 1.5%. (3) 34% if the settlement date is within the taxpayers 2001 year of income.
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CGT implications No scrip-for-scrip CGT rollover relief is chosen The following tables set out the Australian CGT implications for a range of Optus Shareholders that do not choose to obtain scrip-for-scrip CGT rollover relief. Individuals
AUSTRALIAN (50% CGT CONCESSION AVA I L A B L E ) A$ AUSTRALIAN NO CGT CONCESSION A$
FOREIGN A$
Total Offer Consideration Capital Gain CGT Net consideration retained Companies
AUSTRALIAN RESIDENT A$
Total Offer Consideration Capital Gain CGT Net consideration retained Superannuation Funds
FOREIGN A$
The capital gain will be disregarded for foreign Optus Shareholders holding less than 10% of Optus Shares. However, the capital gain will be included in the assessable income of Australian resident shareholders, subject to the benefit of any unrecouped capital losses carried forward and any applicable CGT concessions. Scrip-for-scrip CGT rollover relief is chosen Basically, the effect of scrip-for-scrip rollover relief is that any capital gain on the proportion of the Offer Consideration representing the SingTel Share component is disregarded. Your CGT cost base in each Optus Share must be apportioned to reflect a non-SingTel Share proportion and a SingTel Share proportion. The non-SingTel Share proportion is worked out as follows. Non-SingTel Share component of Offer Consideration x Cost Base Total Offer Consideration Applying the assumed numbers above, the non-SingTel Share proportion (the cash component) of the CGT cost base is A$1.13, calculated as follows: 2.25 x 1.85 = A$1.13 3.67 The capital gain on the non-SingTel Share cash component of the Offer Consideration (that is ineligible for CGT rollover relief) is worked out as follows. Non-SingTel Share Capital Proceeds Non-SingTel Share CGT cost base Accordingly, the capital gain to the Optus Shareholder is A$1.12 (A$2.25 A$1.13). The value of the SingTel Share in this example is A$1.42 (A$3.67 A$2.25). The remaining cost base of your Optus Share is A$0.72 (A$1.85 A$1.13).
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The capital gain that is disregarded because of scrip-for-scrip CGT rollover relief is A$0.70 (A$1.42 A$0.72). Further, the SingTel Share proportion of the original cost base in your Optus Shares (A$0.72) is transferred to the replacement SingTel Shares. This will be used in working out the CGT implications of a future disposal of SingTel Shares. The tax implications for various Australian resident Optus Shareholders are set out below. Please note that, as foreign shareholders are not entitled to CGT rollover relief, their tax outcomes are as above. Individuals
AUSTRALIAN (50% CGT CONCESSION AVA I L A B L E ) A$ AUSTRALIAN NO CGT CONCESSION A$
Total Offer Consideration Capital Gain on non-scrip component CGT Net consideration retained Companies
AUSTRALIAN RESIDENT A$
Total Offer Consideration Capital Gain on non-scrip component CGT Net consideration retained Superannuation Funds
AUSTRALIAN (33% CGT CONCESSION AVA I L A B L E ) A$
Total Offer Consideration Capital Gain on non-scrip component CGT Net consideration retained (b) Accepting the Buy-Back Alternative General comments
If you choose the Buy-Back Alternative, SingTel Australia will act as your agent in transferring your Optus Shares to Optus and in receiving payment of the A$ Equivalent of your chosen Offer Consideration (less any Withholding Tax deducted by Optus). SingTel Australia will then allocate this payment on your behalf to acquire the applicable amounts of cash, SingTel Shares, SingTel Bonds and Unsecured Notes as provided in your chosen Offer Consideration alternative. The Buy-Back Consideration paid by Optus to you (irrespective of which Offer Consideration alternative you have chosen) will contain a capital return component and an unfranked dividend component. It is proposed to treat a portion of the Offer Consideration payable under the Buy-Back Alternative as a return of capital by Optus. That portion will be treated as the capital return component of the Buy-Back Consideration, and the balance of the Buy-Back Consideration will be treated as an unfranked dividend. The portion of the Buy-Back Consideration to be treated as a return of capital by Optus will be the proportion that the number of Optus Shares bought back by Optus represents of Optus total issued shares. Discussions with the Australian Taxation Office indicate, but do not confirm, that the proposed allocation between the capital return and unfranked dividend components should generally be acceptable for Australian tax purposes, in which case the tax consequences outlined below should result.
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Optus has requested an administratively binding advice from the Australian Taxation Office to confirm that the proposed allocation between the capital return and unfranked dividend components is appropriate for withholding tax purposes. Shareholders should however obtain and rely on their own professional advice. You may choose to seek a private binding ruling from the Australian Taxation Office specific to your own circumstances, but you should consult with your professional adviser before doing so. (i) Unfranked dividend component Australia has special tax rules setting out the tax implications that arise when a company, in an off-market transaction, buys back shares in itself. The Buy-Back by Optus will be regarded as an off market transaction as it is not made in the ordinary course of stock exchange trading. When the Buy-Back is carried out off market, Australian tax law deems the BuyBack Consideration to include a dividend component, with the sale still being subject to CGT (with appropriate measures to ensure that no double taxation occurs). In Optus case, this deemed dividend will be an unfranked dividend, so that there is no franking credit available in respect of the tax payable by you on the dividend component. The dividend will be wholly taxable if you are an Australian resident. If you are a non-resident of Australia, the dividend will be subject to the relevant dividend Withholding Tax. The dividend Withholding Tax rate will depend on whether you are a resident in a country with which Australia has negotiated a double tax treaty (in which case dividend Withholding Tax is generally 15% of the total dividend), or in a country with which Australia has not negotiated a double tax treaty (in which case dividend Withholding Tax is generally 30% of the total dividend). Any Withholding Tax will be deducted from your Buy-Back Consideration and will be paid by Optus to the Australian Taxation Office on your behalf. (ii) CGT implications There are also CGT implications for Optus Shareholders who choose the Buy-Back Alternative and hold their Optus Shares as a capital investment. It is recommended that where you hold your Optus Shares as trading stock or part of an income generating arrangement, you should seek independent professional advice. The Australian CGT rules are structured so that they have a catch-all approach. However, to avoid double taxation from this catch-all approach, there are reconciliation provisions to reduce any calculated capital gains by any amounts otherwise assessable as a deemed dividend. The CGT rules provide that a capital gain or loss will generally arise (ignoring any available inflation indexation benefits) equal to the difference between the capital proceeds (in this case the Buy-Back Consideration) and the shareholders CGT cost base in the Optus Shares bought back. Importantly, however, to avoid double taxation, the deemed dividend component of the Buy-Back Consideration is subtracted, reducing the amount of any capital proceeds (referred to above as the capital return component). Capital gains or losses incurred are deemed to occur on the date of the Buy-Back by Optus (that is, the Settlement Date). The cost base for SingTel Shares, SingTel Bonds and US$ foreign currency is discussed in detail below.
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(iii) Table 2 Examples of the CGT implications under the Buy-Back Alternative These tax rules are complex, and best illustrated by an example. The calculations in the following example have been based on opening prices for Optus Shares and SingTel Shares and the S$/A$ exchange rate as at 8 May 2001. It is recommended that each Optus Shareholder should review their own position taking into account the current prices and exchange rates and their individual circumstances. It is assumed for the purposes of this example that you choose the Share and Cash Alternative. Examples based on the Share Alternative or the Share, Cash and Bond Alternative have not been provided. If these Offer Consideration alternatives were chosen, the assumptions used to calculate this example would change in respect of the Buy-Back Consideration and the unfranked dividend component (as explained above, this is the difference between the Buy-Back Consideration and the share capital returned). It is assumed for the purposes of this example that the Share and Cash Alternative is valued at A$3.67, based on opening prices for Optus Shares, SingTel Shares and the S$/A$ exchange rate as at 8 May 2001. This example is based on the following assumptions. Buy-Back Consideration Share Capital Returned Unfranked dividend component CGT cost base (ignoring indexation) Tax rate for Australian resident individuals Tax rate for Australian resident superannuation funds Tax rate for Australian resident companies Dividend withholding tax rate treaty country Dividend withholding tax rate non-treaty country
(1) (2) (3) (4)
Calculated by subtracting A$1.41 capital component from the Buy-Back Consideration of A$3.67. This was the buy-in price for retail investors when Optus was floated in 1998. Includes Medicare levy of 1.5%. 34% if the settlement date is within the taxpayers 2001 year of income.
Individuals
AUSTRALIAN RESIDENT A$ FOREIGNT R E AT Y C O U N T RY A$ FOREIGN-NO T R E AT Y A$
Buy-Back Consideration Taxable Dividend Tax on dividend CGT Net consideration retained Companies
AUSTRALIAN RESIDENT A$
FOREIGNT R E AT Y C O U N T RY A$
FOREIGN-NO T R E AT Y A$
Buy-Back Consideration Taxable Dividend Tax on dividend CGT Net consideration retained
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Superannuation funds
AUSTRALIAN RESIDENT A$ FOREIGNT R E AT Y C O U N T RY A$ FOREIGN-NO T R E AT Y A$
Buy-Back Consideration Taxable Dividend Tax on dividend CGT Net consideration retained
In the examples above the Optus Shareholder made a capital loss of A$0.44 per Optus Share. This capital loss is calculated as the amount by which the Optus Shareholders CGT cost base of A$1.85 exceeds the capital proceeds component of the Buy-Back Consideration. The capital proceeds component is A$1.41, being the amount by which the total Buy-Back Consideration of A$3.67 exceeds the deemed dividend component of A$2.26. (c) SingTel Shares Where you are an Australian tax resident and accept the Offer you will become a shareholder in SingTel. Taxation of SingTel dividends for Australian residents Dividends paid to you by SingTel should be taxable in Australia. There should be no Singapore taxes creditable as a foreign tax credit against your Australian tax liability. It is expected that no Singapore withholding tax will be imposed on the payment of a dividend, as discussed in Section 7.2 Singapore Taxation Considerations. Where you are not a tax resident of Australia, there will generally be no Australian tax payable on dividends you receive from SingTel. Future disposal of SingTel Shares by Australian residents The disposal of SingTel Shares will give rise to a capital gain or loss for Australian CGT purposes. If you accept the Offer and choose to obtain scrip-for-scrip CGT rollover relief (if available) in respect of the SingTel Shares acquired in exchange for your Optus Shares you will acquire the cost base and history of the Optus Shares. The cost base of the SingTel Shares will represent an apportionment of the original cost of the Optus Shares which is illustrated in the above example. The date of acquisition for CGT purposes (in particular the CGT concession) is the date of acquisition of the Optus Shares. If you accept the Offer and do not choose to obtain scrip-for-scrip CGT rollover relief (or where it was not available), the date of acquisition is either the date of acceptance of the Offer under the Transfer Alternative or the date of acceptance of the Buy-Back by Optus (that is, the Settlement Date) under the Buy-Back Alternative. The cost base of any SingTel Shares should be the market value of those SingTel Shares on that day (which is used to calculate either your capital gain or Buy-Back Consideration). The exception will be where an Optus Shareholder receives Unsecured Notes (upon acceptance of the Share, Cash and Bond Alternative). The date of acquisition of SingTel Shares acquired upon redemption of the Unsecured Notes will be the redemption date. The CGT cost base of the SingTel Shares will be the portion of the Redemption Amount allocated to acquire the SingTel Shares.
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(d) SingTel Bonds Taxation of interest received by Australian residents Australian residents will be subject to Australian tax on interest received in respect of the SingTel Bonds. The treatment under Singapore tax law of interest on the SingTel Bonds is discussed in Section 7.2. If interest paid on the SingTel Bonds is exempt from Singapore tax when it is received by a non-resident of Singapore and not subject to any Singapore withholding taxes, there will be no foreign tax credit available for offset against your Australian tax liability. Future redemption of SingTel Bonds by Australian residents Australian residents should have a cost base in the SingTel Bonds equal to the Bond Issue Price (or the portion of the Unsecured Note Redemption Amount allocated to acquire SingTel Bonds) at the relevant date of acquisition. A capital gain or loss may arise to Australian resident holders of the SingTel Bonds on redemption of the SingTel Bonds, based on movements in the A$/US$ exchange rate and the redemption price. It is not anticipated that the SingTel Bonds will be disposed of prior to redemption or will be redeemed early. Holders who dispose of their SingTel Bonds prior to redemption or have their SingTel Bonds redeemed early should seek independent professional advice in relation to their own particular circumstances. (e) Foreign currency Foreign currency is treated as an asset for Australian CGT purposes. Australian resident shareholders who choose to receive US$ as part of their Offer Consideration will therefore hold a CGT asset. The cost base of the US$ should be the relevant A$ market value of the US$ (or the portion of the Unsecured Note Redemption Amount allocated to acquire US$) on the relevant date of acquisition. Therefore, disposal of the US$ at a later time will give rise to a capital gain or loss. (f) Unsecured Notes No income will be received on issue to you of any Unsecured Notes. The Unsecured Notes will be issued in A$ and therefore no capital gain or loss equal to an exchange gain or loss should arise on redemption of the Unsecured Notes for their face value of A$1.48. The allocation of the A$ redemption proceeds to acquire SingTel Shares, SingTel Bonds or cash should establish the cost base of the SingTel Shares, SingTel Bonds or US$ for Australian CGT purposes. SingTel Shares will be issued at A$2.74 each. SingTel Bonds will be issued at the Bond Issue Price. Any US$ cash will be acquired by Optus Shareholders under the Announcement Exchange Rate of US$0.4940/A$1.
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Optus Shareholders who are not tax residents of Singapore are advised to consult their own tax advisers to take into account the tax laws of their respective countries of residence and the existence of any double taxation agreement which their country of residence may have with Singapore. This summary is based on laws and their interpretation in effect as of the date of this Bidders Statement, all of which are subject to change, possibly with retroactive effect. (a) SingTel Shares (i) Income Tax General Singapore resident taxpayers, which broadly include individuals who are residing in Singapore and companies which are controlled or managed in Singapore, are subject to Singapore income tax on: income that is accrued in or derived from Singapore; and foreign income received or deemed to be received in Singapore.
The corporate tax rate in Singapore is 25.5% for the year of assessment 2001. The corporate tax rate has been reduced to 24.5% for the year of assessment 2002. The year of assessment 2002 relates to the calendar year ending 31 December 2001 for individuals and for corporations, their financial year ending in 2001. Non-resident corporate taxpayers are broadly also subject to Singapore income tax on the same income. Non-resident corporate taxpayers not located in Singapore and with no permanent establishment in Singapore are not taxable on foreign source income remitted to Singapore. Non-resident individuals are (subject to certain exceptions) only subject to Singapore income tax on income accruing in or derived from Singapore. Gain on disposal of shares Singapore currently does not have a capital gains tax regime. However, capital gains may be construed to be income and subject to Singapore income tax if: they arise from activities properly regarded as the carrying on of a trade or business in Singapore; or they are short term (that is, if the asset disposed of had been held for three years or less) investment gains from the sale of real property or shares in unlisted companies with substantial real property or real property related assets in Singapore.
Any profits from the disposal of SingTel Shares are not taxable in Singapore unless the seller is regarded as carrying on a trade in those shares in Singapore, in which case, the disposal profits would be taxable as trading income. Dividend distributions Singapore income tax paid by SingTel is imputed as a tax credit to SingTel Shareholders in Singapore when they are paid a dividend. The tax credit is considered a prepayment of tax. It can be set off against any Singapore income tax liability on a SingTel Shareholders Singapore taxable income. SingTel Shareholders resident in Singapore will be taxed on the gross amount of dividends, that is, the dividends received plus the tax credit. If the amount of Singapore tax payable by the SingTel Shareholder is less than the tax credit, the SingTel Shareholder will be entitled to a refund of the difference from the Inland Revenue Authority of Singapore. A SingTel Shareholder who is not a tax resident of Singapore will be taxed at the same income tax rate on which the credit is imputed. Consequently, non-resident SingTel Shareholders will not need to pay any further Singapore tax on the dividends received.
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Dividends declared out of the tax-exempt profits of SingTel will be exempt from tax in the hands of SingTel Shareholders who are Singapore tax residents. This would also generally be the case for non-resident SingTel Shareholders. Both resident and non-resident SingTel Shareholders should seek their own advice on the implications of receiving tax-exempt dividends. Where SingTel receives foreign dividends in Singapore and is allowed tax credit relief against the Singapore tax payable, it is able to pay the net foreign dividends received to its SingTel Shareholders as tax-exempt dividends. The tax-exempt dividends are exempt from Singapore tax in the hands of both resident and non-resident SingTel Shareholders. Non-resident SingTel Shareholders should, however, consult their own tax advisers in relation to how such dividends will be treated in their country of residence. (ii) Stamp duty No stamp duty is payable on the allotment or holding of SingTel Shares. Stamp duty is payable on the instrument of transfer of SingTel Shares at the rate of S$2.00 for every S$1,000 of consideration payable for the transfer of the shares. The purchaser is liable for the stamp duty unless otherwise agreed. Broadly, no stamp duty is payable if no instrument of transfer is executed or if the instrument of transfer is executed outside Singapore. Stamp duty is not applicable to electronic transfers of shares through CDP. See Section 8.7. (iii) Estate duty SingTel Shares held by an individual, are subject to Singapore estate duty upon such individuals death, whether or not such individual is domiciled in Singapore. (b) SingTel Bonds (i) Interest payments Ordinarily, any interest in connection with the SingTel Bonds derived by any person would be subject to tax in Singapore. Where any payment of interest (and this may include a discount arising on bonds issued and realised on maturity) which is chargeable to tax is made by a person in Singapore to a person not known to be a resident in Singapore for tax purposes, such payment would be subject to Singapore withholding tax (currently 24.5%). However, if the interest is derived by a person not resident in Singapore from sources other than its trade, business, profession or vocation carried on or exercised in Singapore and is not effectively connected with any permanent establishment of that person in Singapore, the withholding tax rate is 15%. The rate of 15% may be reduced by applicable tax treaties. As the issue of the SingTel Bonds is lead-managed by Morgan Stanley Dean Witter Asia (Singapore) Pte, which is an Approved Bond Intermediary and SingTel Bonds are issued during the period from 10 May 1999 to 27 February 2003, SingTel Bonds are qualifying debt securities, subject to all conditions as prescribed under the Singapore Income Tax Act (Chapter 134) (the ITA) and the regulations having been met. Two of the conditions referred to in section 13(1)(a) of the ITA are as follows: the exemption from tax shall not apply to any interest derived by a permanent establishment in Singapore; and SingTel includes in all offering documents a statement to the effect that where interest is derived from any qualifying debt securities issued during the period from 27 February 1999 to 27 February 2003 by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption shall not apply if such person acquires such securities using funds from Singapore operations. Funds from Singapore operations means, in relation to a person, the funds and profits of that persons operations through a permanent establishment in Singapore.
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Accordingly (subject to the exceptions mentioned further below concerning SingTel Bonds): interest on SingTel Bonds received by a holder who is not resident in Singapore and who does not have any permanent establishment in Singapore is exempt from Singapore tax. It is hereby stated in compliance with the relevant condition referred to in section 13(1)(a) of the ITA that, where interest is derived from SingTel Bonds by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption shall not apply if such person acquires such SingTel Bonds using funds from Singapore operations; and subject to certain conditions having been fulfilled (including the submission by SingTel of a return on the debt securities to the Singapore Comptroller of Income Tax (Comptroller)) interest on SingTel Bonds received by any company in Singapore is subject to tax at a concessionary rate of 10%.
The following exceptions apply in respect of the tax exemptions and concessions mentioned above. The SingTel Bonds will not qualify as qualifying debt securities if during the primary launch of the SingTel Bonds, the SingTel Bonds are issued to less than four persons and 50% or more of the principal amount of such SingTel Bonds is beneficially held or funded, directly or indirectly, by related parties of SingTel. Even though the SingTel Bonds are qualifying debt securities, if, at any time during the tenor of the SingTel Bonds, 50% or more of the principal amount of the SingTel Bonds is held beneficially or funded, directly or indirectly, by any related parties of SingTel, interest derived from the SingTel Bonds held by any related parties of SingTel, or any other person where the funds used by such person to acquire the SingTel Bonds are obtained, directly or indirectly, from any related party of SingTel, shall not be eligible for the tax exemption or the concessionary rate of tax of 10%.
A related party of SingTel for these purposes is a person who, directly or indirectly, controls SingTel, or is controlled, directly or indirectly, by SingTel, or a person who, directly or indirectly, is under the control of another person who also controls SingTel. As a general rule, interest paid to a person not known to be a resident of Singapore is subject to Singapore withholding tax at the rates of tax specified above. However, by virtue of section 45(9) of the ITA, interest paid on SingTel Bonds would not be subject to withholding tax provided the following conditions are satisfied: SingTel includes in all offering documents a statement to the effect that any person whose interest derived from those securities is not exempt from tax shall include such interest in a return of income made under the ITA; and SingTel, or such other person as the Comptroller may direct, furnishes to the Comptroller a return on the debt securities within such period as the Comptroller may specify and such other particulars in connection with those securities as the Comptroller may require.
Accordingly, it is hereby stated in compliance with the relevant condition referred to in section 45(9) of the ITA that any person whose interest derived from the SingTel Bonds is not exempt from tax shall include such interest in a return of income made under the ITA. The terms and conditions of the SingTel Bonds (set out in Annexure 3) include specific provisions relating to the obligations of SingTel if it is required by law to deduct withholding tax from payments of interest under the SingTel Bonds.
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(ii) Trading Income Income derived by financial institutions in Singapore from trading in the SingTel Bonds during the period from 28 February 1998 to 27 February 2003 is subject to Singapore tax at a concessionary rate of 10%. (iii) Capital gains Any gains in the nature of capital made from the sale of the SingTel Bonds will not be taxable in Singapore. However, any gains from the sale of the SingTel Bonds derived by a person as part of a trade or business carried on by that person may be taxable in Singapore as such gains are considered revenue in nature. (c) Unsecured Notes The Unsecured Notes will not be transferable. Accordingly, no issue arises as to taxation of any proceeds on transfer of the Unsecured Notes. The Unsecured Notes will be converted into SingTel Shares, SingTel Bonds or cash, and no liability to Singapore income tax or stamp duty is expected to arise on such conversion.
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SECTION 8
INFORMATION ON SINGTEL SHARES
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I N F O R M AT I O N O N S I N G T E L S H A R E S
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any issue of any shares ranking equally with, or in priority to, the Special Share; any variation of the rights of any SingTel Share which has the effect of transferring a controlling interest in SingTel; the appointment, reappointment, termination or removal of any director (or alternate director); any disposal or any other matter which, in the opinion of the holder of the Special Share, affects the security interests of the Republic of Singapore; the winding up or dissolution of SingTel; and an issue of shares that would result in a person or a related group of persons (other than Temasek) having, directly or indirectly, an interest in more than 15% of SingTels issued share capital for the time being.
A decision or opinion expressed by the holder of the Special Share is final, conclusive and binding on all parties concerned and is not subject to judicial review. (ii) Proposed conversion of Special Share SingTel announced on 27 April 2001 that the holder of the Special Share had given written notice to SingTel of the surrender of all rights attaching to the Special Share and the conversion of the Special Share into an ordinary SingTel Share. This surrender and conversion take effect from the amendment of SingTels Articles of Association in accordance with the resolutions to be considered at the EGM. (c) Issue of new shares The SingTel Board may only issue new SingTel Shares with the prior approval of SingTel Shareholders. SingTel Shareholders may confer on the SingTel Board a general authority to issue new SingTel Shares. The SGX-ST Listing Manual restricts the aggregate number of SingTel Shares which may be issued under such an authority to not more than 50% of the number of SingTel Shares on issue for the time being, of which the aggregate number of SingTel Shares to be issued other than on a pro rata basis to SingTels Shareholders may not exceed 20% of the number of SingTel Shares on issue for the time being. On 25 September 2000, SingTels Shareholders gave the SingTel Board a general authority to issue shares up to the maximum permitted by the SGX-ST Listing Manual. The authority will lapse on the earlier of the conclusion of the next annual general meeting or 30 August 2001 (being the date by which the next annual general meeting is required by the Singapore Companies Act to be held). The SingTel Board may issue new shares with such rights and restrictions as they may determine, provided that: the issue is consistent with the SGX-ST Listing Manual (considered above), the Singapore Companies Act and the rights attaching to existing shares; unless with the prior approval of the holder of the Special Share, no shares are issued to any person or related group of persons (other than to Temasek) if, in the opinion of the SingTel Board, the issue would result in such persons having, directly or indirectly, an interest in more than 15% of SingTels issued shares. (The rights attaching to the Special Share will be extinguished following the approval of the resolutions to be considered at the EGM (see Section 8.3(b)(ii)), and the discretion to approve such an issue will be conferred on the SingTel Board); no shares are to be issued which will result in the transfer of a controlling interest in SingTel without prior approval of SingTel Shareholders in general meeting; no shares may be issued at a discount except in accordance with the Singapore Companies Act; and unless with the approval of SingTel Shareholders, any issue of shares for cash to holders of shares of any class shall be offered pro rata to them in accordance with their shareholding.
(d) Bonus and rights issues The SingTel Board may, with the approval of SingTel Shareholders, capitalise any reserves or profits and distribute them as fully paid bonus shares to SingTel Shareholders pro rata in accordance with their shareholding. The SingTel Board may, with the approval of SingTel Shareholders, also issue rights to take up additional shares to SingTel Shareholders in proportion to their shareholdings. See Section 8.3(c) above on the existing general authority conferred on the SingTel Board to issue new shares.
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(e) Variation of rights The rights attached to any class of SingTel shares may be varied or abrogated with the written consent of the holders of three quarters in nominal value of the issued shares of that class or the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class (attended by at least two persons or their proxies holding or representing at least one third in nominal value of the issued shares of that class). Where the necessary majority is not obtained at a meeting, the resolution may be passed within a further two months by the written consent of at least three quarters in nominal value of the issued shares in the relevant class. (f) Register of members Only persons who are registered in SingTels register of members (other than CDP) or persons named as depositors in the depository register maintained by CDP and who have SingTel Shares entered against their names in the depository register, are recognised as SingTel Shareholders. Amendments to SingTels Articles of Association are to be considered at the EGM which will allow the SingTel Board to make rules allowing for persons who hold SingTel Shares in the form of CDIs on ASX to be recognised as having rights equivalent, as much as practicable, to those of holders of SingTel Shares through CDP. SingTel does not, except as required by law, recognise any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (subject to limited exceptions) other rights in respect of any share other than the absolute right of the person (other than CDP) whose name is entered in the register of members as the registered holder, or the person whose name is entered in the depository register maintained by CDP, in respect of that share. SingTel may close the register of members at any time provided that the register of members shall not be closed for more than 30 days in any year. SingTel is required to give the Singapore Registrar of Companies at least 14 days notice and the SGX-ST at least 10 clear Market Days notice of any such closure. (g) Transfer of SingTel Shares There are no restrictions on the transfer of SingTel Shares except where required by law or SingTels Articles of Association. Restrictions may apply where shares are not fully paid. The procedure for transfer of SingTel Shares is set out in SingTels Articles of Association. The SingTel Board may decline to register any transfer of shares if it would result in any person or related group of persons (other than Temasek or a person approved by the holder of the Special Share or, following the surrender of the rights attaching to the Special Share, a person approved by the SingTel Board) having an interest in more than 15% of SingTels issued share capital. The SingTel Board may serve a notice requiring any SingTel Shareholder to dispose of any interest which exceeds 15% of SingTels issued share capital. The right of the holder of the Special Share to approve transfers of more than 15% of SingTels issued share capital will be removed if the proposed amendments to SingTels Articles of Association are approved at the EGM. A description of the transfer arrangements for SingTel Shares traded on the ASX or the SGX-ST is set out in Section 8.7. (h) Repurchase of SingTel Shares SingTel may purchase its own shares in accordance with its Articles of Association and the Singapore Companies Act. SingTel must obtain shareholder approval to purchase or otherwise acquire its own shares. On 25 September 2000, SingTel Shareholders renewed a general shareholders mandate authorising the SingTel Board to purchase or otherwise acquire SingTel Shares on the terms set out in the mandate. The mandate will expire (unless revoked earlier) on the date of SingTels next annual general meeting, expected to be in August 2001 or the date on which SingTels next annual general meeting is required by law to be held, whichever is earlier. The total number of SingTel Shares which may be purchased or acquired pursuant to the mandate is limited to that number of SingTel Shares representing 5% of the issued ordinary SingTel share capital as at the date of the general meeting (being 25 September 2000). Purchases or acquisitions of SingTel Shares may be made on-market and/or off-market. In the case of off-market acquisitions, an offer must be made to all SingTel Shareholders in accordance with an
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equal access scheme prescribed by the Singapore Companies Act. The mandate limits the maximum price that SingTel may pay to purchase or acquire SingTel Shares. Any SingTel Share purchased or acquired by SingTel is deemed cancelled immediately on purchase or acquisition. All rights and privileges attached to that SingTel Share expire on cancellation. Except in certain circumstances permitted by the Singapore Companies Act, SingTel may not provide financial assistance for the acquisition or proposed acquisition of SingTel Shares. Pursuant to the current mandate, SingTel has acquired 11,116,000 SingTel Shares by way of on-market purchases transacted on the SGX-ST. The following table sets out details of the SingTel Shares acquired by SingTel between 1 January 2001 and 30 April 2001.
D AT E O F TRANSACTION T O TA L N U M B E R O F SINGTEL SHARES ACQUIRED HIGHEST PRICE LOWEST PRICE T O TA L PER SINGTEL P E R S I N G T E L C O N S I D E R AT I O N SHARE (S$) SHARE (S$) (S$)
(i) The SingTel Board The SingTel Board is responsible for the overall management of SingTel. SingTels Articles of Association set the minimum number of directors at two. SingTel currently has 11 directors. A number of directors retire at each annual general meeting of shareholders and are eligible for re-election. The number of directors retiring and eligible to stand for re-election each year varies, but generally it is equal to one third of the number of directors in office, with the directors who have been in office longest since their re-election or appointment standing for election, except that the managing director (being the President and Chief Executive Officer) is not subject to retirement by rotation. If the proposed alterations to SingTels Articles of Association to comply with the ASX Listing Rules are approved at the EGM, directors (other than the President and Chief Executive Officer) must retire if they would be in office for more than three years at the next annual general meeting and the number of managing directors who may be excluded from retirement by rotation is restricted to one (being the President and Chief Executive Officer). SingTels Articles of Association permit a director to appoint an alternate director to act in place of such director should the director be unable to perform his or her duties as a director for a period of time. (j) Officers and auditors indemnity SingTels Articles of Association provide that, subject to and so far as may be permitted by the Singapore Companies Act, the directors, officers and auditors shall be entitled to be indemnified by SingTel against any liability incurred in the execution and discharge of his or her duties or in defending any proceedings, whether civil or criminal: which relate to anything done or omitted to have been done as an officer or employee of SingTel; and in which judgment is given in his or her favour or in which he or she is acquitted or in connection with any application under any statute for relief in respect thereof in which relief is granted to him or her by the court.
SingTel may not indemnify its directors, officers and auditors against any liability which by law would otherwise attach to them in respect of any negligence, default, breach of duty or breach of trust of which they may be guilty in relation to SingTel. (k) SingTel Shareholder meetings SingTel must hold an annual general meeting every year within 15 months after the date of the previous annual general meeting, and within five months after the end of its financial year. SingTel is required to lay its audited accounts for adoption by SingTel Shareholders at its annual general meeting.
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The directors may convene an extraordinary general meeting whenever they think fit, and must do so if a written request to call a meeting is made by SingTel Shareholders representing not less than 10% of the total voting rights. In addition, two or more SingTel Shareholders holding not less than 10% of SingTels issued share capital may call a general meeting. Voting at SingTels general meetings is generally by ordinary resolution, requiring the approval of a simple majority of the votes cast at the meeting. However, a special resolution, requiring the approval of at least 75% of the votes cast at the meeting, is required for certain matters, including (but not limited to) the following: voluntary winding up; amendments to SingTels Memorandum of Association and Articles of Association; a change of corporate name; and a reduction in share capital, share premium account or capital redemption reserve fund.
SingTel must give at least 21 days notice in writing for every general meeting convened for the purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days notice in writing. The notice must be given to every SingTel Shareholder who has supplied SingTel with an address in Singapore for the giving of notices. Amendments are to be made to SingTels Articles of Association (if approved at the EGM) that require notices of general meetings to be given to ASX. (l) Voting rights A SingTel Shareholder is entitled to attend, speak and vote at any general meeting, in person or by proxy. Proxies need not be a SingTel Shareholder. A SingTel Shareholder may appoint not more than two proxies to attend and vote at the same general meeting except that this restriction does not apply to CPF, and, if the amendments to be made to the Articles of Association are approved at the EGM, will not apply to CDN. A person who holds SingTel Shares through the SGX-ST book-entry settlement system will only be entitled to vote at a general meeting as a SingTel Shareholder if his name appears in the depository register maintained by CDP 48 hours before the general meeting. Except as otherwise required by SingTels Articles of Association or by law, two or more SingTel Shareholders must be present in person or by proxy to constitute a quorum at any general meeting. Under SingTels Articles of Association: on a show of hands, every SingTel Shareholder present in person or by proxy has one vote; and on a poll, every SingTel Shareholder present in person or by proxy has one vote for each SingTel Share which he or she holds or represents.
A poll may be demanded in certain circumstances, including: by the chairman of the meeting; or by any two SingTel Shareholders present in person or by proxy and entitled to vote; or by any SingTel Shareholder present in person or by proxy and representing not less than 10% of the total voting rights of all SingTel Shareholders having the right to vote at the meeting; or by any SingTel Shareholder present in person or by proxy and holding shares conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid on all shares conferring that right.
However, no poll may be demanded on the question of the choice of a chairman or on a question of the adjournment of the meeting. In the case of a tied vote, whether on a show of hands or a poll, the chairman of the meeting shall be entitled to a casting vote. To facilitate the listing of SingTel Shares on the ASX and the holding of SingTel Shares through CDN, it is proposed that SingTels Articles of Association be amended at the EGM to provide a mechanism to allow holders of SingTel CDIs through CDN or their nominees to be appointed as proxies of CDN in respect of their CDIs as shown in their CDN accounts as at a time not earlier than 48 hours before the time of the general meeting. In respect of each CDI holders SingTel Shares, that CDI holder will be able to appoint himself or herself as the first-named proxy and another person in his or her place, as the proxy of CDN in respect of those shares. CDN will be entitled under these arrangements to appoint any number of proxies. This will enable CDI holders to attend, speak and vote (both on a show of hands and on a poll) as proxies of CDN at any SingTel general meeting.
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(m)Dividends SingTel may, by ordinary resolution at a general meeting of SingTel Shareholders, declare dividends, but no dividend may exceed the amount recommended by the SingTel Board. The SingTel Board may pay interim dividends without approval from SingTel Shareholders. Dividends may only be paid out of profits. However, it is provided in the Singapore Companies Act that SingTel may capitalise its share premium account and apply it to pay dividends, if such dividends are satisfied by the issue of shares to SingTel Shareholders. Dividends are payable pro rata in proportion to the amount paid-up on each SingTel Share, unless the rights attaching to any SingTel Share provide otherwise. Pursuant to the listing of SingTel Shares on the ASX and the holding of SingTel Shares through CDN, it has been proposed that SingTels Articles of Association be amended at the EGM to deal with payment of dividends in currencies other than S$. (n) Substantial shareholdings Under the Singapore Companies Act, a person has a substantial shareholding in SingTel if he or she has an interest (or interests) in one or more SingTel Shares and the nominal amount of that share (or the aggregate of the nominal amounts of those shares) is not less than 5% of the aggregate of the nominal amount of all issued SingTel Shares. (An interest is a similar but not identical concept to relevant interest under the Corporations Law.) A person having a substantial shareholding in SingTel is required to make certain disclosures to SingTel under the Singapore Companies Act, including the particulars of his or her interests and the circumstances by which he or she has such interests. Legislation is proposed, which, if passed, would require disclosure, as a matter of statutory duty, of these matters by substantial shareholders to the SGX-ST. (o) Takeovers The Singapore Companies Act and the Singapore Code on Takeovers and Mergers regulate the acquisition of ordinary shares of public companies and contain certain provisions that may delay, deter or prevent a future takeover or change in control of SingTel. Any person acquiring an interest, either alone or together in concert with other parties (as defined in the Singapore Code on Takeovers and Mergers), in 25% or more of the voting shares in SingTel must extend a takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Code on Takeovers and Mergers. An offer for consideration other than cash must be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror within the preceding 12 months. A person is also required to make a takeover offer if the person holds, either alone or together with parties acting in concert, between 25% and 50% of the voting shares and acquires additional voting shares representing more than 3% of the voting shares in any 12 month period. (p) Liquidation or other return of capital On a liquidation or other return of capital, SingTel Shareholders are entitled to participate in any surplus assets in proportion to their shareholdings, subject to any special rights attaching to any other class of shares. (q) Minority rights Section 216 of the Singapore Companies Act protects the rights of minority shareholders of Singapore-incorporated companies by giving the Singapore courts a general power to make any order, upon application by any SingTel Shareholder if: SingTels affairs are being conducted or the powers of the SingTel Board are being exercised in a manner oppressive to, or in disregard of the interests of, one or more SingTel Shareholders; or SingTel takes an action or threatens to take an action, or SingTel Shareholders pass or propose to pass a resolution which unfairly discriminates against, or is otherwise prejudicial to, one or more SingTel Shareholders.
Singapore courts have wide discretion as to the relief they may grant to remedy such oppressive or unfairly discriminatory conduct.
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(r) Reporting requirements Under the SGX-ST Listing Manual, SingTel is required, as soon as reasonably practicable, to disclose to the SGX-ST for public release factual information of a material nature relating to SingTel or its subsidiaries which is necessary to avoid the establishment of a false market in SingTel Shares or which might reasonably be expected to affect market activity and the price of its securities or which is necessary for appraisal of the position of SingTel and its subsidiaries by the SGX-ST, holders of SingTel securities and the public. SingTel is required to make immediate announcements on certain matters specified in the SGX-ST Listing Manual to the SGX-ST. These matters include amendments to SingTels Memorandum and Articles of Association, appointments and resignations of its directors and officers, notices and results of general meetings, receipt of substantial shareholder notices, certain proposed acquisitions and disposals and the declaration of dividends. SingTel is required to release to the SGX-ST half-yearly consolidated financial statements and annual financial statements as soon as available and in any event not later than three months after the expiry of the relevant half-year or financial year. SingTel has commenced a practice of also issuing quarterly financial statements. SingTel is required to issue an annual report to its members and the SGX-ST, and to lay its audited accounts within five months after the end of its financial year for adoption by SingTel Shareholders at its annual general meeting. If SingTel becomes listed on ASX, it will be a disclosing entity under Australian company law and will become subject to Australian continuous disclosure requirements under the Corporations Law and the ASX Listing Rules. (s) Interested person transactions SingTel, its subsidiaries and target associated companies (as defined in the SGX-ST Listing Manual) are restricted in certain circumstances from entering into transactions with interested persons without making an announcement to SGX-ST or obtaining shareholder approval or both. Broadly, interested persons include the Chief Executive Officer, SingTel directors, substantial SingTel Shareholders and their associates (as defined in the SGX-ST Listing Manual). Shareholders approval and/or an immediate announcement is required in respect of interested person transactions if the value of the transaction is equal to or exceeds certain financial thresholds. In particular, shareholders approval is required where: (i) the value of such transaction (a Threshold 2 transaction) is: (A) equal to or above 3% of SingTels latest audited consolidated net tangible assets; and (B) below Threshold 2 (as defined below), and such amount, when aggregated with the values of all other Threshold 2 transactions previously entered into with the same interested person in the current financial year, is equal to, or exceeds, Threshold 2; or (ii) the value of such transaction is equal to or exceeds Threshold 2. Threshold 2, for these purposes, is an amount equal to 5% of SingTels latest audited consolidated net tangible assets. SingTel Shareholders may authorise SingTel, its subsidiaries and target associated companies to enter into transactions with interested parties which are of a revenue or trading nature or those necessary for its day-to-day operations. The authorisation may not extend to the acquisition or sale of assets, undertakings or businesses. SingTel Shareholders have issued SingTel, its subsidiaries and target associated companies with a mandate (which is subject to annual renewal) to enter into a broad range of transactions related to the business of SingTel, its subsidiaries and target associated companies, with each of Temasek, SingTel directors, SingTels Chief Executive Officer, substantial shareholders (other than Temasek) and their respective associates on arms length, commercial terms. Following the listing of SingTel Shares on the ASX, SingTel will also be subject to the ASX Listing Rules restrictions on transactions with persons in a position of influence.
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7,596,231 46,132,500
753 1,637
Non-executive directors and executives of SingTel may participate in the 1999 Scheme. Options may be granted to participants in the 1999 Scheme based on their rank, past performance, years of service, potential for future development and in respect of non-executive directors, their contributions to the success and development of SingTel and its subsidiaries. Options are granted for nominal consideration. The number of options which may be granted under the 1999 Scheme is limited to that number of options which, when aggregated with all SingTel Shares issued or which would be issued assuming the exercise of all outstanding options under the 1999 Scheme, would not exceed 5% of SingTels issued share capital. Options may not be transferred (other than to personal representatives on death), charged, assigned, pledged or otherwise disposed of, without the approval of the Compensation Committee.
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Options may be granted under the 1999 Scheme with an exercise price equal to, or at a discount of up to 20% of, the average of the closing SingTel Share prices on the SGX-ST over the five consecutive trading days preceding the grant of the option (the Market Price). Options with an exercise price equal to the Market Price may be exercised after the first anniversary but before the tenth anniversary (in the case of a person who is an employee at the date of grant of the option) or the fifth anniversary (in respect of all other optionholders) of the grant of the option. Options with an exercise price at a discount to the Market Price may be exercised after the second anniversary but before the tenth anniversary (in the case of a person who is an employee at the date of grant of the option) or the fifth anniversary (in respect of all other optionholders) of the grant of the option. An option lapses immediately if not exercised by the end of the exercise period or if the holder becomes bankrupt, disposes of the option, engages in misconduct or (unless otherwise determined by the Compensation Committee administering the scheme) ceases to be an employee or a non-executive director. Except where optionholders are properly compensated, options may be exercised early in the event of a takeover offer for SingTel Shares, the approval of a scheme for the reconstruction of SingTel or its amalgamation with another company or a winding up resolution is passed.
12,034,480,466
29,088,009
78.27
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settlement cash flows are more predictable and settlement risks are reduced as a result of the regulation of electronic transfers; and holders receive holding statements just like a bank statement.
The holding statement will set out the number of SingTel CDIs issued to (or subsequently transferred to or by) each holder. The holding statement will also advise the holder of the holder reference number of their holding. A holding statement will be provided to holders on a periodic basis if there is a change in their holding of SingTel CDIs. A summary of the rights and entitlements of CDI holders is set out below. Further information about CDIs is available from Computershare Investor Services Pty Limited (SingTels Australian share registry) or any stockbroker. (a) Number of CDIs issued in relation to SingTel Shares Accepting Optus Shareholders will be issued with one CDI for every SingTel Share to which they become entitled. (b) Converting from a CDI holding to a CDP holding A holder of SingTel CDIs may convert a holding of SingTel Shares to a holding in CDP by: if the CDIs are in an Issuer Sponsored Holding, notifying SingTels Australian share registry (Computershare Investor Services Pty Limited); or if the CDIs are in a CHESS Holding, notifying the Controlling Participant in relation to those SingTel CDIs.
In both cases, once SingTels Australian share registry has been notified of your wish to do this and of the CDP securities account to which you wish to transmit the SingTel Shares, it will arrange for that transmission to occur. A holder of CDIs wishing to take advantage of this will first need to establish a securities account with CDP. A stockbroker in Singapore or an Australian stockbroker with arrangements with a Singapore stockbroker will be able to inform you of the mechanism for achieving this. All dealings in and transactions of the SingTel Shares in Singapore on the SGX-ST shall be effected for settlement through the CDP system. Settlement of trades through the CDP system may be effected only by CDP Depository Agents (usually stockbrokers) or through your own direct securities accounts with CDP, and shall be made in accordance with the Terms and Conditions for Operation of Securities Account with CDP as amended from time to time, copies of which are available from CDP. (c) Converting to a certificated holding SingTel is required by Singapore law to issue physical share certificates for all SingTel Shares issued by it. A SingTel Shareholder who holds SingTel Shares through CDP will not receive physical share certificates for such SingTel Shares because they are registered in the name of CDP and the physical share certificates are held by or for CDP. The SingTel Shares to be issued as a result of acceptances of the Offer will be issued by SingTel to CDP which will enter them in the depository register maintained by it in the name of CDN to hold for and on behalf of accepting Optus Shareholders. If an accepting Optus Shareholder (or any other person holding SingTel CDIs) converts that holding into a holding through a securities account with CDP (as explained above), it is entitled by withdrawing those shares from CDP to be registered directly on the SingTel share register. The ability to do this will be governed by the rules of CDP. (d) Trading on the ASX or the SGX-ST stock markets The existing SingTel Shares (which are held through CDP) can currently only be traded on the SGX-ST stock market. All traded SingTel Shares will be the subject of the application for listing on the ASX along with the SingTel Shares issued (in CDI form) as a result of acceptances of the Offer. Accordingly, existing holders of SingTel Shares will be able, by converting their holdings into CDIs, to trade on the ASX stock market. This will be achieved by the holder instructing CDP to transmit the securities to CDN and informing them of the relevant CHESS Holding in which they are to be held following transmission to CDN (or if there is none, the CDIs will be held on SingTels issuer sponsored sub-register). Once that has occurred, those SingTel Shares will be tradeable in CDI form on the ASX. Similarly, any holder of CDIs by converting the CDIs into a holding through a securities account with CDP, will be able to trade the SingTel Shares on the SGX-ST stock market.
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(e) Dividends, rights and other shareholder entitlements The SCH Business Rules, which have statutory recognition under the Corporations Law, require SingTel to treat CDI holders as if they were holders of the underlying SingTel Shares. The SCH Business Rules seek to ensure that CDI holders have all the direct economic benefits of legal ownership (for example, the right to receive the same dividends, rights issues and bonus issues) as holders of SingTel Shares through CDP. If a cash dividend or any other cash distribution is made in a currency other than A$, SingTels Australian share registry (acting as CDNs agent) will convert the dividend or other cash distribution into A$ (unless the foreign currency is not readily convertible into A$). That dividend or distribution will then be distributed to CDI holders in A$ in accordance with each holders entitlement. As mentioned in Section 8.3(m), SingTel proposes to amend its Articles of Association to deal with payment of dividends to CDN to be in currencies other than S$. (f) Voting entitlements CDI holders will not appear on the SingTel share register as the legal holder of SingTel Shares and will not obtain the benefit of the concession under the Singapore Companies Act recognising persons entered in the depository register maintained by CDP as the holders of SingTel Shares. Therefore, amendments to SingTels Articles of Association are proposed to be made as described in Sections 8.2 and 8.3(l) to address this matter. (g) Other rights CDI holders will not appear on either the SingTel share register or the depository register maintained by CDP as the legal holders of SingTel Shares. Accordingly, other rights conferred on SingTel Shareholders (including the rights summarised in Section 8.3) may only be capable of enforcement by CDI holders by instructing CDN or by converting the holding to one entered in the depository register maintained by CDP or registered directly on the SingTel share register. (h) Fees A CDI holder will not incur any additional fees or charges as a result of being a CDI holder. (i) CDI trading and the transfer restrictions in the Articles of Association The restrictions on transfer set out in Section 8.3(g) will not apply in relation to CDIs because they will be transferred electronically through the CHESS system without any interference. However, if a person, through a holding of CDIs comes to exceed the 15% shareholding interest level mentioned in Section 8.3(g), the SingTel Board (if the amendments to SingTels Articles of Association proposed at the EGM are approved) will be entitled under SingTels Articles of Association to direct CDN (as the legal holder) to dispose of any relevant SingTel Shares. In addition, a holding of SingTel Shares in the form of CDIs will need to be taken into account fully by a person in determining the number of SingTel Shares in which the person has an interest for the purposes of the substantial shareholding provisions under the Singapore Companies Act. (See Section 8.3(n).)
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SECTION 9
THE OFFER
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9.2 CONSIDERATION
(a) Alternatives You are invited to dispose of your Optus Shares for one of the following forms of consideration (the Offer Consideration): (i) 1.66 SingTel Shares for each Optus Share (the Share Alternative); (ii) A$2.25 in cash (or the US$ Cash Alternative) and 0.8 SingTel Shares for each Optus Share (the Share and Cash Alternative); or (iii) A$2.00 in cash (or the US$ Cash Alternative) plus A$0.45 worth of SingTel Bonds (determined by reference to the Bond Issue Price) and 1 Unsecured Note (the Share, Cash and Bond Alternative). You may choose only one of these Offer Consideration alternatives. (b) US$ Cash Alternative If you choose the Share and Cash Alternative or the Share, Cash and Bond Alternative, you may choose to receive the US$ Cash Alternative in lieu of the A$ amount. (c) If you do not make a choice If you accept this Offer but do not indicate a choice of which of the Offer Consideration alternatives you wish to receive, or you give conflicting indications, you will, subject to Section 9.11(b), be taken to have chosen the Share and Cash Alternative (but not the US$ Cash Alternative).
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Settlement Date, no adjustment needs to be made to the Bond Issue Price to take into account interest accruing between the First Settlement Date and the issue date of such SingTel Bonds. (c) No listing No application has been made for the listing of the SingTel Bonds on a stock market of a securities exchange, either in Australia or elsewhere. SingTel will use reasonable endeavours to obtain credit ratings for the SingTel Bonds from Standard & Poors and Moodys Investors Service as soon as practicable, and in any event within six months of the date on which the SingTel Bonds are issued. SingTel may explore a listing of the SingTel Bonds on the London Stock Exchange or the Luxembourg Stock Exchange after such ratings are obtained. However, SingTel and SingTel Australia do not represent or imply that the SingTel Bonds will be rated, or quoted on any stock market, and this Offer is not conditional on any such rating or quotation. (d) Clearing details In order to choose the Share, Cash and Bond Alternative, you must give SingTel Australia the details of an account with Euroclear or Clearstream in which you wish to hold the SingTel Bonds (see Section 9.8(e)(iv)). SingTel will issue those SingTel Bonds so that they are credited to that account.
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(c) If you choose the Share Alternative If you accept this Offer, choose the Buy-Back Alternative and also choose the Share Alternative, SingTel Australia will, on your behalf, pursuant to Section 9.7(b), only subscribe for that number of SingTel Shares calculated by dividing the Subscription Funds by the A$ Equivalent of the Market Value of one SingTel Share, rounded up to the nearest whole number of SingTel Shares. (If you are a Foreign Shareholder and you choose the Share Alternative, the effect of this provision is that the Withholding Tax payable will be deducted from the Offer Consideration and only the remaining part of the Offer Consideration will be provided in the form of SingTel Shares.) (d) SingTel Australias role as agent SingTel Australia, in its role as your agent pursuant to Section 9.7(b), is permitted to perform actions which will give a commercial benefit to SingTel Australia or SingTel.
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(d) To choose the Buy-Back Alternative Issuer Sponsored Holdings only If you want to accept this Offer and choose the Buy-Back Alternative, you must: (i) ensure that your Acceptance Shares are in an Issuer Sponsored Holding (if they are in a CHESS Holding, you must arrange with your Controlling Participant for your Acceptance Shares to be converted to an Issuer Sponsored Holding); (ii) complete and sign the Acceptance Form and indicate your choice of the Buy-Back Alternative, in accordance with the instructions on it; and (iii) send the Acceptance Form together with all other documents required by the instructions on it to the address specified on the Acceptance Form (you can use the addressed envelope provided) so that, if posted, the envelope in which they are sent is post-marked before the end of the Offer Period or, if otherwise delivered, they are received at that address before the end of the Offer Period. (e) Choosing your Offer Consideration To choose your Offer Consideration: (i) if you accept this Offer by instructing your Controlling Participant to do so (in accordance with Section 9.8(b)(i)), you must also instruct your Controlling Participant to specify the Takeover Consideration Code for the Offer Consideration you want; (ii) if you are a Broker or a Non-Broker Participant and accept this Offer by yourself initiating acceptance (in accordance with Section 9.8(b)(ii)), you must specify the Takeover Consideration Code for the Offer Consideration you want when you initiate acceptance; (iii) if you accept this Offer by returning the Acceptance Form (in accordance with Sections 9.8(b), 9.8(c) or 9.8(d)), you must specify the Takeover Consideration Code in the appropriate place on the Acceptance Form for the Offer Consideration you want, in accordance with the instructions on the Acceptance Form; and (iv) if you accept this Offer and wish to choose the Share, Cash and Bond Alternative, you must also give SingTel Australia the details of an account with Euroclear or Clearstream in which you wish to hold the SingTel Bonds in accordance with the instructions on the Acceptance Form. If you do not do this, you will be taken to have chosen the Share and Cash Alternative (but not the US$ Cash Alternative). (f) Foreign laws Neither this Offer nor the SingTel Shares, SingTel Bonds or Unsecured Notes to be issued as Offer Consideration are registered in any jurisdiction outside Australia (unless an applicable foreign law treats them as registered as a result of the Bidders Statement being lodged with ASIC). It is your sole responsibility to satisfy yourself that you are permitted by any foreign law applicable to you to accept this Offer and to receive SingTel Shares, Unsecured Notes or SingTel Bonds (if any) as consideration. (g) Optus Options If you hold Optus Options under the EOP or SPP you should complete the Notice of Exercise on the reverse of your Option certificate and send it to the Optus Registry together with, if you hold your Optus Options under the EOP, your cheque for the exercise price of A$4.11 per option. When you receive notice of the issue of your Optus Shares you should complete the Acceptance Form in accordance with the instructions in this Section 9.8.
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(v) if you choose the Buy-Back Alternative: (A) represented and warranted to SingTel Australia and Optus that your Acceptance Shares are an Issuer Sponsored Holding; (B) offered to Optus to sell your Acceptance Shares to Optus on the terms of the Buy-Back Agreement and asked Optus to reserve your Acceptance Shares for the purposes of the BuyBack Agreement; (C) appointed SingTel Australia as your agent to do the things referred to in Section 9.7(b); (D) authorised SingTel Australia to represent and warrant, and agree with, Optus on your behalf the matters referred to in clauses 7 and 8 of the Buy-Back Agreement and all other matters which you warrant or represent to SingTel Australia under this Section 9.10(a); (E) applied for the SingTel Shares and the SingTel Bonds and Unsecured Notes (if any) chosen by you pursuant to Sections 9.2 and 9.8; and (F) agreed to accept the SingTel Shares (in the form of CDIs), and the SingTel Bonds and Unsecured Notes (if any) to which you become entitled by acceptance of this Offer subject to the terms of this Offer, the Memorandum and Articles of Association of SingTel, and the Trust Deeds constituting the SingTel Bonds and Unsecured Notes (as applicable) and the provisions relating to the holding of those SingTel Shares in the form of CDIs, and authorised appropriate entries to be placed in the relevant register of holders (including CDN being entered in the Depository Register of CDP and CDP being entered in the share register of SingTel in relation to those SingTel Shares); (vi) represented and warranted to SingTel Australia and, if you choose the Buy-Back Alternative, also to Optus, that your Acceptance Shares are at the time of your acceptance and of transfer to SingTel Australia or Optus (as the case may be) free of any encumbrances and, if you choose the Transfer Alternative, that SingTel Australia will acquire good title to and beneficial ownership of them; (vii)if and when the contract resulting from acceptance of this Offer becomes unconditional, appointed each of the directors and officers of SingTel Australia for the time being individually as your attorney to: (A) attend and vote in respect of your Acceptance Shares of which you are the registered holder for the time being at all general meetings of Optus; and (B) execute all forms, notices, documents (including a document appointing a director or officer of SingTel Australia as a proxy in respect of any of your Acceptance Shares and an application to Optus for a replacement certificate for any share certificate that has been lost or destroyed) and resolutions relating to your Acceptance Shares and generally to exercise all powers and rights which you have as the registered holder of your Acceptance Shares; and (C) do all things necessary or convenient to obtain a replacement certificate for any share certificate that has been lost or destroyed or to vest good title in your Acceptance Shares in SingTel Australia or Optus, and agreed that, in exercising those powers, the attorneys may act in the interests of SingTel Australia as the beneficial owner and intended registered holder of those Optus Shares; (viii)agreed not to attend or vote in person at any general meeting of Optus or to exercise, or to purport to exercise (in person, by proxy or otherwise) any of the powers conferred on the directors and officers of SingTel Australia by Section 9.10(a)(vii); (ix) represented and warranted to SingTel Australia and, if you choose the Buy-Back Alternative, also to Optus, that you are not and are not acting on behalf of a Restricted Foreign Shareholder, unless otherwise indicated on the Acceptance Form; (x) acknowledged and agreed that if you are unable to make the representation and warranty in Section 9.10(a)(ix) or if SingTel Australia believes that you are or are acting on behalf of a United States Shareholder or any other Restricted Foreign Shareholder, a nominee approved by ASIC (the Nominee) will sell the SingTel Shares and SingTel Bonds (if any) which would otherwise be issued to you (including any SingTel Shares or the SingTel Bonds issued following the redemption of Unsecured Notes pursuant to the Unsecured Note Provisions), as described in Section 9.11(b);
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(xi) acknowledged and agreed that, except as permitted by and in accordance with applicable law, you will not offer or resell in, or to persons in, the United States of America any SingTel Shares or the SingTel Bonds which you acquire at any time, although that does not prohibit any sale on the ASX or SGX-ST if neither you nor any person acting on your behalf knows, or has reason to know, that the sale has been prearranged with, or that the purchaser is, a person in the United States of America; and (xii)instructed SingTel to issue the CDIs applicable to your acceptance of the Offer, if your Optus Shares are in a CHESS Holding, with the same holder identification number as affects your Optus Shares; and if your Optus Shares are held as an Issuer Sponsored Holding, on SingTels issuer sponsored CDI sub-register. (b) Validation of otherwise ineffective acceptances Except in relation to Optus Shares which are in a CHESS Holding, if you choose the Transfer Alternative, SingTel Australia may in its absolute discretion treat the receipt by it of the Acceptance Form as a valid acceptance although it does not receive the other documents required by the instructions on the Acceptance Form or any of the other requirements for acceptance have not been complied with. If SingTel Australia does so, then, subject to Section 9.11, SingTel Australia will not be obliged to make the consideration available until it receives all those documents and all of the requirements for acceptance referred to in Section 9.8 and in the Acceptance Form have been met. If you do not give SingTel Australia all necessary transfer documents for the Acceptance Shares within one month after the end of the Offer Period, SingTel Australia may avoid the contract that results from your acceptance of this Offer.
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(iii) Optus Shareholders who are resident in New Zealand are Restricted Foreign Shareholders if they choose the Share, Cash and Bond Alternative. (iv) If you are a Restricted Foreign Shareholder with respect to SingTel Securities that you have chosen as Offer Consideration under Sections 9.2 and 9.8, SingTel Australia will: (A) arrange for the allotment to the Nominee of the number of SingTel Securities to be issued in accordance with the Offer to which you and all other Restricted Foreign Shareholders would have been entitled but for this Section 9.11(b); (B) cause the SingTel Shares and SingTel Bonds so allotted (including any SingTel Shares or SingTel Bonds issued following the redemption of Unsecured Notes pursuant to the Unsecured Note Provisions) to be offered for sale in such manner, at such price and on such other terms and conditions as are determined by the Nominee; (C) pay to you the amount ascertained in accordance with the relevant formula: for SingTel Shares: Net Proceeds of Sale x NFS TFS where: (I) Net Proceeds of Sale is the amount remaining after deducting from the proceeds of sale by the Nominee the expenses of the sale; (II) NFS is the number of SingTel Shares which would otherwise be issued to you; and (III)TFS is the total number of SingTel Shares issued to the Nominee under this Section 9.11(b). for the SingTel Bonds: Net Proceeds of Sale x NFS TFS where: (I) Net Proceeds of Sale is the amount remaining after deducting from the proceeds of sale by the Nominee the expenses of the sale; (II) NFS is the number of SingTel Bonds which would otherwise be issued to you; and (III)TFS is the total number of SingTel Bonds allotted to the Nominee under this Section 9.11(b). Payment will be made in A$. The Net Proceeds of Sale, if in a currency other than A$, will be converted to A$ at the time of payment using the relevant exchange rate for value on the date of payment. (c) Cash payments generally Payment of any cash amount to which you are entitled will be made by cheque in A$ or US$ if you have chosen an Offer Consideration with a US$ component. The cheque will be sent to you by prepaid ordinary mail (or in the case of overseas shareholders, by airmail) to your address as shown on the Acceptance Form or such other address as you may notify to SingTel Australia in writing before despatch. (d) Clearances for cash payments If at the time you accept the Offer you are resident in, or a resident of, a place outside Australia to which the Banking (Foreign Exchange) Regulations apply, you will not be entitled to receive any cash consideration (including without limitation any amount payable under Section 9.11(b)) until all requisite authorities or clearances of the Reserve Bank of Australia (whether under the Regulations or otherwise), or the Australian Taxation Office, have been obtained by SingTel Australia. SingTel Australia undertakes to make prompt application for all such authorities or clearances. The Banking (Foreign Exchange) Regulations currently apply to Iraq, Libya, Taliban, the government and governmental authorities of Yugoslavia and the National Union for the Total Independence of Angola (and its senior officials and their families and its members).
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(e) Costs and stamp duty SingTel Australia will pay all costs and expenses of the preparation and circulation of the Offer and the stamp duty (if any) payable on transfers of Optus Shares to SingTel Australia or (if you choose the Buy-Back Alternative) to Optus. (f) Handling fee A handling fee may be paid by SingTel Australia, at its expense and not as a deduction from the amount payable to you, to any broker member of ASX whose stamp appears on the Acceptance Form in respect of any Optus Shares other than those held by that broker.
9.12 CONDITIONS
(a) Defeating Conditions This Offer and the contract resulting from its acceptance (the Contract) are subject to these conditions: (i) Foreign investment approval Before the end of the Offer Period, notice in writing (either unconditional or subject only to conditions that are acceptable to SingTel Australia (acting reasonably)) is issued by or on behalf of the Australian Treasurer stating that the Treasurer consents, or that the Treasurer does not have any objection, under the Australian Governments foreign investment policy, to the acquisition by SingTel Australia of all of the Optus Shares the subject of the Offer or the Placement, or the Treasurer ceases to be entitled to make an order under Part II of the Foreign Acquisitions and Takeovers Act regarding the acquisition of those shares. (ii) Minimum acceptance At any time during or at the end of the Offer Period, SingTel Australia receives acceptances in respect of more than 50% (by number) of the Optus Shares the subject of the Offers. (iii) No prescribed occurrences None of the following events occurs during the period beginning on 26 March 2001 and ending at the end of the Offer Period other than as strictly necessary to implement the Offers, each Contract, the Buy-Back or the Placement: (A) Optus converts all or any of its shares into a larger or smaller number of shares; (B) Optus or a subsidiary of Optus resolves to reduce its share capital in any way; (C) Optus or a subsidiary of Optus: (I) enters into a buy-back agreement; or (II) resolves to approve the terms of a buy-back agreement under section 257C(1) or 257D(1) of the Corporations Law; (D) Optus or a subsidiary of Optus issues shares (other than Optus Shares issued as the result of the exercise of Optus Options or issued under Optus Employee Share Plans during the period from the Register Date to the end of the Offer Period in accordance with an announcement made by Optus before 25 March 2001 or under the Q1 2001 Plan or the Q2 2001 Plan where SingTel Australia has given its consent to the issue before the Instrument Date) or grants an option over its shares, or agrees to make such an issue or grant such an option; (E) Optus or a subsidiary of Optus issues, or agrees to issue, convertible notes; (F) Optus or a subsidiary of Optus disposes, or agrees to dispose, of the whole, or a substantial part, of its business or property unless that disposal is associated with an upgrade of any part of Optus networks and/or infrastructure; (G) Optus or a subsidiary of Optus charges, or agrees to charge, the whole, or a substantial part, of its business or property; (H) Optus or a subsidiary of Optus resolves to be wound up; (I) the appointment of a liquidator or provisional liquidator of Optus or of a subsidiary of Optus; (J) a court makes an order for the winding up of Optus or of a subsidiary of Optus;
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(K) an administrator of Optus, or of a subsidiary of Optus, is appointed under section 436A, 436B or 436C of the Corporations Law; (L) Optus or a subsidiary of Optus executes a deed of company arrangement; or (M) a receiver, or a receiver and manager, is appointed in relation to the whole, or a substantial part, of the property of Optus or of a subsidiary of Optus, in each case, except to the extent that SingTel or its officers, employees, agents or advisers have actual knowledge at 25 March 2001 of the prospect of the event. (iv)FSSA and IATA Before the end of the Offer Period, notice in writing approving the acquisition of Optus in accordance with the Offers is issued by or on behalf of: (A) the Treasurer, in relation to any approval that is required under the Financial Sector (Shareholdings) Act 1998; and (B) the relevant Minister in relation to any approval that is required under the Insurance Acquisitions and Takeovers Act 1991. (v) ASX Listing Condition Before the end of the Offer Period, ASX approves the listing of SingTel and quotation of new SingTel Shares to be issued pursuant to the Offer. (vi) Material adverse change During the period beginning on 26 March 2001 and ending at the end of the Offer Period: (A) no change occurs in relation to the business, financial or trading position or condition, or the assets, liabilities or profitability, of Optus or a subsidiary of Optus which has or is likely to have one of the following effects: (I) the net profit after tax and abnormal items of the consolidated Optus Group for the 12 months ended 31 March 2001 is 25% or more lower than for the 12 months ended 31 March 2000 (as shown in Optus published audited financial statements); or (II) the net assets of the consolidated Optus Group are 10% or more lower than net assets of the consolidated Optus Group as at 31 March 2000 (as shown in Optus published audited financial statements) (the 2000 Net Assets); (B) neither Optus nor any subsidiary of Optus acquires (as defined in the ASX Listing Rules) or disposes (as defined in the ASX Listing Rules) of: (I) any single asset, or collection of assets (if the assets are acquired or disposed of in what is in substance one transaction), where the book value or the value of the consideration exceeds an amount which is 10% of the 2000 Net Assets; or (II) any business (whether by means of the acquisition or disposition of assets and goodwill or a body corporate which conducts the business), where the book value or the value of the consideration exceeds an amount which is 2% of the 2000 Net Assets; (C) neither Optus nor any subsidiary of Optus enters into any joint venture or partnership which requires it to dedicate to the joint venture or partnership any single asset or collection of assets having a book value exceeding an amount which is 2% of the 2000 Net Assets or which commits it to expend an amount exceeding an amount which is 2% of the 2000 Net Assets; (D) the Optus Group taken as a whole does not make or commit to make capital expenditure of more than A$150 million in excess of the capital expenditure which it is committed or has planned (ie, approved in accordance with capital planning governance procedures even though it is not yet committed) to make as at 26 March 2001,
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in each case, except to the extent that SingTel or its officers, employees, agents or advisers have actual knowledge at 25 March 2001 of the prospect of the event. (vii)SingTel shareholder approval Before the end of the Offer Period, a resolution to approve the performance by SingTel or any of its subsidiaries of its obligation in connection with funding the Buy-Back for the purpose of, and all procedures required under, section 76 of the Singapore Companies Act (if it is required by law or any Government Agency or regulatory authority) are passed and complied with. (b) Nature of conditions Each of the Defeating Conditions in each paragraph and each sub-paragraph of Section 9.12(a) is and must be construed as a separate, several and distinct condition. The Defeating Condition in Section 9.12(a)(i) (the FIRB Condition) is a condition precedent. The other Defeating Conditions are conditions subsequent, and so do not prevent a contract resulting from acceptance of this Offer coming into effect, but any breach or non-fulfilment of any of them entitles SingTel Australia, by notice to you, to rescind the contract resulting from your acceptance of this Offer. (c) The benefit of the Defeating Conditions Subject to the Corporations Law, and until the end of the Offer Period, SingTel Australia alone is entitled to the benefit of the Defeating Conditions or to rely on any non-fulfilment of any of them. (d) Offer declared free of conditions (i) Subject to section 650F of the Corporations Law, SingTel Australia may declare the Offer and each Contract free from all or any of the Defeating Conditions (other than the Minimum Acceptance Condition and the FIRB Condition), generally or in relation to any specific occurrence by giving notice in writing to Optus. Any such notice must be given not less than seven days before the end of the Offer Period. (ii) If, at the end of the Offer Period, the Defeating Conditions have not been fulfilled and SingTel Australia has not declared the Offer and the Contracts (or they have not become) free from those conditions, all Contracts will be automatically void. (e) Statutory notice The date for giving the notice on the status of the Defeating Conditions is 25 June 2001 (subject to extension in accordance with the Corporations Law if the Offer Period is extended).
9.13 OFFEREES
(a) Registered holders SingTel Australia is making an offer in the form of this Offer to: (i) holders of Optus Shares on Optus register of members on the Register Date; (ii) holders of Optus Shares issued during the period from the Register Date to the end of the Offer Period, as a result of the conversion of, or exercise of rights attached to Optus Options on Optus register of option holders on the Register Date; and (iii) holders of Optus Shares issued under Employee Share Plans during the period from the Register Date to the end of the Offer Period, in accordance with an announcement made by Optus before 25 March 2001 or under the Q1 2001 Plan or the Q2 2001 Plan where SingTel Australia has given its consent to the issue before the Instrument Date. An offer in the form of this Offer is being sent to holders of Optus Shares and Optus Options on the Register Date and to participants in the Optus employee share plans who will be issued with Optus Shares after the Register Date and before the end of the Offer Period in accordance with an announcement made by Optus before 25 March 2001 or with the prior consent of SingTel Australia.
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(b) Beneficial holders A person who is able during the Offer Period to give good title to a parcel of Optus Shares may, in accordance with section 653B of the Corporations Law, accept as if an Offer had been made to that person in relation to those Optus Shares.
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SECTION 10
SUMMARY OF SINGTEL BOND TERMS AND CONDITIONS
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10.1 SUMMARY
The following is a general summary of the terms of the SingTel Bonds. This summary is derived from and should be read in conjunction with, the full text of the terms and conditions of the SingTel Bonds (set out in Annexure 3), the Trust Deed (as defined in the Terms and Conditions of the SingTel Bonds) and the Agency Agreement relating to the SingTel Bonds. The terms and conditions set out in Annexure 3, the Trust Deed and the Agency Agreement prevail to the extent of any inconsistency with the terms set out in this Section 10. Issuer Description Singapore Telecommunications Limited. Up to US$494 million Bonds due 2006 (the Tranche A Bonds) and up to US$494 million Bonds due 2008 (the Tranche B Bonds, and together with the Tranche A Bonds, the SingTel Bonds). The aggregate nominal amount of SingTel Bonds to be issued will be determined by acceptance levels under the Share, Cash and Bond Alternative of the Offer subject to a maximum issue size of US$988 million, which is the equivalent of A$2.0 billion at a fixed exchange rate of A$1.00 = US$0.4940. Subject to a maximum issue size of US$988 million, SingTel may, from time to time, without the consent of Bondholders (as defined in the Terms and Conditions of the Bonds), create and issue additional SingTel Bonds having the same terms and conditions as previous series of SingTel Bonds in all respects (save for the date of issue) so that such additional SingTel Bonds shall be consolidated and form a single series with the SingTel Bonds. The SingTel Bonds will be issued at 100% of the principal amount of the SingTel Bonds, subject to any rounding adjustment made to the Interest Rate as determined below. Tranche A Bonds: The Tranche A Bonds will bear interest at the rate per annum (expressed as a percentage) equal to the sum of (i) 80 basis points and (ii) the Reference Rate, as determined by Morgan Stanley Dean Witter Asia (Singapore) Pte two business days prior to the First Issue Date (as defined below). Tranche B Bonds: The Tranche B Bonds will bear interest at the rate per annum (expressed as a percentage) equal to the sum of (i) 90 basis points and (ii) the Reference Rate, as determined by Morgan Stanley Dean Witter Asia (Singapore) Pte two business days prior to the First Issue Date. Reference Rate Tranche A Bonds: The five year US$ swap mid-rate as determined by Morgan Stanley Dean Witter Asia (Singapore) Pte by reference to page 19901 of the Dow Jones Telerate Service, at 3.00 pm (London time), two business days prior to the First Issue Date. Tranche B Bonds: The seven year US$ swap mid-rate as determined by Morgan Stanley Dean Witter Asia (Singapore) Pte by reference to page 19901 of the Dow Jones Telerate Service, at 3.00 pm (London time), two business days prior to the First Issue Date. business day means a day on which commercial banks in New York City and London are open or not authorised to close. Interest Payment Dates Interest will be payable semi-annually in arrear, commencing six months after the First Issue Date.
Issue Size
Further Issues
Interest Rate
144
Arranger and Lead Manager Trustee Principal Paying Agent Status of the Bonds
Negative Pledge
145
Clearance
Global Bonds
Taxation
146
Selling Restrictions
Governing Law
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SECTION 11
OTHER INFORMATION
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O T H E R I N F O R M AT I O N
The maximum amount that SingTel Australia could be required to pay in cash for Optus Shares if every holder of Optus Shares accepted the Offer in respect of the Optus Shares referred to above, chose the Share and Cash Alternative (except CWAP which, for the purposes of this calculation is assumed to choose the Share, Cash and Bond Alternative) and elected to receive the cash in A$ is A$8,024,879,100. In addition: (i) if every holder of Optus Options referred to above exercised their options and accepted the Offer in respect of those Optus Shares and chose the Share and Cash Alternative and elected to receive the cash in A$; and (ii) if all additional Optus Shares which may be issued during the period from the Register Date to the end of the Offer Period under the Employee Share Plans are issued (being 7,187,736 additional Optus Shares) and the holders of these Optus Shares accepted the Offer in respect of those Optus Shares and chose the Share and Cash Alternative, an additional A$37,890,344 would be payable in cash by SingTel Australia in respect of the Offer. The maximum total amount payable by SingTel Australia in cash under the Offer based on the assumptions set out above, would therefore be A$8,062,769,444. Based on information provided by Optus, there are no Optus Shares or Optus Options which may be issued or exercised during the Offer Period, other than as set out above. Note that the amounts referred to above do not take into account that Optus Shareholders may choose to receive the cash component in A$ or US$ under the Offer Consideration alternatives under the terms of the Offer, and potential exchange rate fluctuations until the close of the Offer.
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(b) Source of cash consideration SingTel Australia will fund the cash consideration component payable for Acceptance Shares using cash provided by SingTel. There are no conditions precedent to SingTel Australia drawing down these funds from SingTel. SingTel will source these funds: (i) firstly, from internal cash resources; and (ii) secondly, under a bridge finance facility, being a non-revolving acquisition loan facility of up to A$3 billion, with usual terms and conditions and conditions precedent for drawdown. SingTel proposes that in due course the bridge finance facility will be replaced by some form of debt issue in the capital market or by long term bank debt. As at the date of this Bidders Statement, SingTel has not drawn down any amount under the bridge finance facility. The following is a general summary (which does not purport to be comprehensive or exhaustive) of the terms of the bridge finance facility. Borrower Facility Amount Type of Facility Purpose Mandated Lead Arranger/ Coordinator/ Book-runner Underwriters Lenders Singapore Telecommunications Limited. Up to A$3,000,000,000. A Non-Revolving Acquisition Loan Facility (Facility). To partially finance the Borrowers acquisition of Optus as contemplated by the Offer. Citicorp Investment Bank (Singapore) Limited (Citicorp) and/or Citibank, N.A. (Citibank) or any of its affiliates.
Citibank and/or any of its affiliates. Citibank, and other financial institutions acceptable to the Lead-Arranger to fund out of their respective branches in Singapore. 11 May 2001. The Facility is available to be drawn at any time after the satisfaction of all Conditions Precedent to the earlier of: (a) 120 days after the Closing Date or such other date as agreed with the group of banks to whom more than 50% of the loan is owed or whose aggregate commitment to the Facility is more than 50% of the Facility Amount; and (b) the withdrawal of the Offer. Any undrawn amount will be cancelled without premium or penalty.
Interest Rates
Interest is calculated by reference to a commercial margin over the average bid rate for bank accepted bills of exchange as published on the Reuters page BBSY.
Conditions Precedent Customary for financings of this nature, including but not to First Advance limited to: (a) board resolutions; (b) legal opinions from counsel reasonably acceptable to the Agent; and (c) delivery of a certified copy of the announcement of the Offer having become unconditional in all respects.
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O T H E R I N F O R M AT I O N
Conditions Precedent (a) Certain representations and warranties are true and to all Advances correct in all material respects on and as of the date of the borrowing, as though made on and as of such date. (b) No Event of Default or event, which with the giving of notice or passage of time or both, would be an Event of Default, has occurred and is continuing, or would result from such borrowing. Events of Default Customary for financings of this nature, including but not limited to the following: (a) failure to pay principal, interest or any other amount payable under the legal documentation when due (with cure periods where appropriate for technical default); (b) representations or warranties materially incorrect when made or deemed made (with cure periods for appropriate incorrect representations or warranties which are capable of cure); (c) failure to comply with covenants (with cure periods where appropriate which are capable of cure); (d) reorganisation, liquidation, voluntary or involuntary bankruptcy or insolvency proceedings; (e) material unsatisfied judgment or order; (f) cross default to other material debt of SingTel or Optus; and (g) change resulting in a Material Adverse Effect (to be defined in legal documentation). Agent Governing Law Citicorp Investment Bank (Singapore) Limited. English law.
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O T H E R I N F O R M AT I O N
PTAT-1 Submarine System Indefeasible Right of Use Agreement dated 27 July 1996 between Optus Networks Pty Limited and Cable & Wireless Network Services Limited; Global Customer Network Reports Capital and Operating Costs Agreement dated 15 December 1997 between Optus Networks Pty Limited and C&W plc; Provision of Australian Components of Global Network Services for Exco Noonan Inc, undated, between Optus Networks Pty Limited and C&W plc; Telecommunications Supply Agreement dated 26 February 1999 between Optus Networks Pty Limited and Cable & Wireless Global Card Services Pty Limited; Global Telecommunications Services Agreement dated 5 April 2000 between Optus Networks Pty Limited and Cable & Wireless Global Markets Limited; International Telecommunications Services Agreement dated 14 September 1992 between Optus Networks Pty Limited and MCL; UK Transit Agreement dated 1 May 1996 between Optus Networks Pty Limited and MCL; North American Dedicated Transit Service Multilateral Agreement dated 25 March 1993 between Optus Networks Pty Limited, Australian and Overseas Telecommunications Corporation Limited and others; Pre-Paid Distribution Agreement dated 15 October 1999 between Optus Mobile Pty Limited, Optus Internet Pty Limited and Cable & Wireless Global Card Services Pty Limited; Pre-Paid Distribution Agreement dated 2 August 1999 between Optus Mobile Pty Limited and Cable & Wireless Global Card Services Pty Limited; Agreement for the Supply and Licence of the Integrated Fraud Detection System dated 30 March 1999 between Optus Systems Pty Limited and C&W plc; Agreement for Transfer and Acquisition of a Line Business dated 26 February 1999 between Optus Networks Pty Limited, Optus Systems Pty Limited, Optus Administration Pty Limited and Cable & Wireless Global Card Services Pty Limited; and Card Services Agency Agreement dated 26 February 1999 between Optus Administration Pty Limited and Cable & Wireless Global Card Services Pty Limited.
At any time after the date that is six months after the Separation Date, either party may elect to terminate any Continuing Agreement if, having consulted each other in good faith, the parties are not willing to have that Continuing Agreement remain in place on the same or amended terms. (ii) Agreements to be terminated after the Separation Date Unless Optus and C&W plc determine otherwise, the following agreements entered into between Optus and C&W plc are to be terminated on and from the Separation Date: General Services Agreement dated 28 September 1998 which relates to the establishment of the framework for the provision of services by C&W plc and its associated companies to Optus; and Secondment Agreement dated 28 September 1998 which relates to the provision for the secondment of employees from C&W plc or its associated companies to Optus or its associated companies.
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O T H E R I N F O R M AT I O N
(iii) Use of intellectual property The Separation Deed makes provision for the following matters: The right to use trade marks and licences Optus has the right to use certain C&W plc names and trade marks (whether registered or unregistered), names and logos and any trade marks, names and logos licensed to Optus and its subsidiaries by a member of the C&W Group. The use of these trade marks, names or logos will be terminated six months after the Separation Date, unless Optus has a continuing right to use a trade mark under a continuing agreement, or otherwise agreed between Optus or SingTel and C&W plc. Domain names Optus may use any Internet domain names including a C&W plc name or the trade marks specified under the Separation Deed for a maximum period of six months after the Separation Date. After that date, Optus must either transfer or cancel the registration of the domain names specified. Change of name Within six months after the Separation Date, Optus must change the name of any Optus subsidiary whose name includes the words Cable & Wireless to a name not including those words. Within six months after the Separation Date, Optus must either remove, cancel or transfer to C&W plc certain trade marks and business names registered in the name of Optus subsidiaries. Optus must not represent itself as being associated with the C&W Group after the Separation Date, except as permitted by the Separation Deed. Information sharing systems Optus and C&W plc must terminate computer information sharing systems within three months after the Separation Date. (iv) Employees All secondments of either C&W plc or Optus employees will be terminated on the Separation Date. SingTel or Optus may offer employment to secondees of C&W plc on terms and conditions determined by SingTel or Optus which are no less favourable to those previously offered by C&W plc or which are acceptable to the employees. Similarly, C&W plc may offer employment to secondees of Optus on terms and conditions determined by C&W plc which are no less favourable to those previously offered by Optus or which are acceptable to the employees. (b) Implementation Agreement Extracts from the Implementation Agreement between SingTel and Optus are set out in Annexure 2. The key terms of the Implementation Agreement are summarised below. (i) Details and implementation of the Offer The Implementation Agreement sets out the key terms of the Offer and contains detailed provisions relating to its implementation, particularly the implementation of the Buy-Back and the arrangements applicable to the issue and redemption of the Unsecured Notes. (ii) Placement SingTel Australia may subscribe for shares in Optus on a one for one basis to replace the Optus Shares bought back, and must do so if required by Optus (unless SingTel Australia is proceeding with Compulsory Acquisition, or an insolvency event subsists in relation to Optus).
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O T H E R I N F O R M AT I O N
(iii) Co-operation in relation to information Each party must use all reasonable endeavours in good faith to provide such information about itself to the other party as the other party reasonably requests to enable the other party to prepare, complete, print and despatch documentation required of it before the end of eight weeks after the date of the Implementation Agreement. (iv) Co-operation in relation to due diligence Each party must give the other access to, and the right to participate in, any due diligence procedures or materials commissioned by the party to allow the other party to verify that statements made by the other party regarding the first party in any of the documents referred to in paragraph (iii) above are true and not misleading. (v) Co-operation in seeking regulatory approvals Each party must co-operate with and provide assistance in good faith to the other party in relation to obtaining all regulatory approvals required to implement the Offer and associated transactions. (vi)Conduct of Optus business Optus must ensure that, from the date of the announcement of the Offer until the end of the Offer Period, the Optus Group taken as a whole will conduct its business in the ordinary course. Optus must co-operate and provide reasonable assistance in good faith in obtaining consents or waivers under material contracts of Optus which may be impacted by the transaction. (vii)Cessation of negotiations and non-solicitation During the six-month period after the date of the Implementation Agreement, Optus must ensure that it and its directors, employees and officers: discontinue any negotiations or discussions; and do not, except with the prior written consent of SingTel, directly or indirectly solicit or initiate any negotiations or discussions with respect to any potential expression of interest, offer or proposal to acquire all or a substantial part of the business of Optus or its share capital.
Optus may consider and respond to any new proposal if required by the fiduciary duties of its directors or otherwise by law. (viii)Provision of information During the six-month period after the date of the Implementation Agreement, other than in the ordinary course of business, Optus must not disclose any non-public information concerning its business or affairs to any person who Optus knows or should know (if it made reasonable enquiry) is a significant competitor of Optus or a person who may make an offer or proposal to acquire all or a substantial part of the business of Optus or its share capital. Optus may disclose information if required by the fiduciary duties of its directors, by law or if required in the ordinary course of the ordinary business of the Optus Group.
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O T H E R I N F O R M AT I O N
Non-executive directors fees Executive directors salaries and benefits Executive directors annual bonuses Compensation for loss of office
(1) Subject to approval by SingTel Shareholders at the annual general meeting expected to be held in August 2001.
The following table sets out the remuneration during the year ended 31 March 2001 of all of the SingTel directors in office as at that date.
T O TA L Y / E T O TA L Y / E 31 MARCH 31 MARCH 2 0 0 1 (1) 2000 S$ S$
DIRECTOR
S A L A RY / F E E S S$
(1)
BONUS S$
BENEFITS S$
Mr Koh Boon Hwee Mr Lee Hsien Yang Mr Paul Chan Kwai Wah Dr Yogen K Dalal MG Lim Chuan Poh Mr Quek Poh Huat Mr Seah Kian Peng Mr Jaspal Singh Mr Jackson Peter Tai Mr Keith Tay Ah Kee Total
70,000 612,710(2) 465,000 40,000 14,583(3) 37,500 45,000 40,000 40,000 16,667(3) 55,000 971,460 465,000
1,980 1,980
70,000 1,079,690 40,000 14,583 37,500 45,000 40,000 40,000 16,667 55,000 1,438,440
(1) Non-executive directors fees are subject to approval by SingTel Shareholders at the annual general meeting expected to be held in August 2001, other than the salary and bonus of the President and CEO, Mr Lee Hsien Yang. Under a resolution of SingTels Shareholders passed at its annual general meeting on 25 September 2000, the maximum aggregate amount payable to SingTels non-executive directors (as a group in relation to their directorship in SingTel only, excluding any directorship in any SingTel subsidiary) is S$109,009. All directors are non-executive directors, other than Mr Lee. (2) Mr Lees salary is inclusive of monthly fixed allowances and employers CPF contributions. (3) Fees are pro-rated for part year service only.
The following table sets out amounts paid to SingTel directors who resigned during the year ended 31 March 2001.
T O TA L Y / E T O TA L Y / E 31 MARCH 31 MARCH 2 0 0 1 (1) 2000 S$ S$
DIRECTOR
S A L A RY / F E E S S$
(1)
BONUS S$
BENEFITS S$
(1) Subject to approval by SingTel Shareholders at the annual general meeting expected to be held in August 2001. Fees are pro-rated for part year service only.
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O T H E R I N F O R M AT I O N
(b) Interests of directors and executive officers The following table sets out information as at 31 March 2001 with respect to the interests (as defined in the Singapore Companies Act) in SingTel Shares held by SingTel directors (as recorded in SingTels Register of Directors Shareholdings as at that date) and executive officers.
SINGTEL SHARES DIRECT DEEMED INTEREST INTEREST SINGTEL SHARES SUBJECT TO OPTIONS (DIRECT INTEREST)
DIRECTOR
Mr Koh Boon Hwee Mr Lee Hsien Yang Mr Paul Chan Kwai Wah Dr Yogen K Dalal M G Lim Chuan Poh Mr Quek Poh Huat Mr Seah Kian Peng Mr Jaspal Singh Mr Jackson Peter Tai Mr Keith Tay Ah Kee Executive officers Mr Chow Wing Keung Ms Chua Sock Koong Mr William Hope Mr Lee Shin Koi Mr Lim Chuan Poh Mr Lim Shyong Mr Lim Toon Mr Sin Hang Boon Mr William Tan Soo Hock Total (c) Corporate governance
31,820 2,333 1,820 1,490 1,820 1,020 1,700 30,000 31,700 1,490 4,190 76,690 1,730 54,700 64,640 25,190 39,810 372,143
1,690 1,690 1,690 1,690 1,490 1,490 1,820 6,690 1,490 1,690 1,690 23,120
2,120,000 534,000 1,031,500 555,000 1,019,000 854,000 648,000 1,426,000 685,500 620,000 9,493,000
SingTel currently applies the principles set out in the Best Practices Guide issued by the SGX-ST. The Best Practices Guide provides guidance on the principles and best practices in corporate governance and dealings by listed issuers and their directors and employees in the securities of SGX-ST listed companies. SingTel has established a formal system for financial monitoring and control. The system deals with delegation of authorities and the provision of business and financial reports to senior management and the SingTel Board. The Board has established five principal committees, each of which is empowered to make decisions on matters within its terms of reference and applicable limits of authority. The Executive Committee comprises the Chairman of the SingTel Board and four non-executive directors. The Executive Committee considers and approves major investment projects of certain values, determines investment policies and manages the groups assets and liabilities in line with the SingTel Boards policies and directives. It reviews and approves, before SingTel Board approval, annual operating and capital expenditure budgets. The Audit Committee comprises four non-executive directors, the majority of whom are independent directors. The Audit Committee meets regularly to receive and review reports from the internal audit department, the external auditors and management. It has full access to and the co-operation of the management and the external auditors. The internal audit department reports functionally to the Audit Committee. The department assists management in achieving and maintaining sound managerial controls over the assets of SingTel. It also works closely with operations in enhancing business and work processes and reviews processes and systems. The Nominations Committee comprises the Chairman of the SingTel Board and a non-executive director. The Nominations Committee reviews and assesses candidates for appointment as a director (including executive directors) before recommendation to the SingTel Board for appointment. It ensures that the SingTel Board has an appropriate balance of independent directors as well as directors with the right profile of expertise, skills, attributes and ability.
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O T H E R I N F O R M AT I O N
The Compensation Committee comprises the Chairman of the SingTel Board and two non-executive directors. This Committee sets and reviews policies concerning the compensation and promotion of top management officers of SingTel as well as personnel policies and human resource matters. The Compensation Committee also administers the Singapore Telecom Executives Share Option Scheme and the Singapore Telecom Share Option Scheme 1999. The Management Committee comprises the President and Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Executive Vice-Presidents and certain Vice-Presidents. The Management Committee directs management and operational policies and activities.
(ii) no amounts have been paid or agreed to be paid, and no benefits have been given or agreed to be given: to any director or proposed director of SingTel to induce them to become, or to qualify them as, a director; or for services rendered by them in connection with the formation or promotion of SingTel or in connection with the offer of securities forming part of the consideration for the Offer.
(b) Benefits to other persons Other than as set out below or elsewhere in this Bidders Statement: (i) no person named in this Bidders Statement as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Bidders Statement, and no promoter of SingTel holds, or has held at any time during the last two years before the date of this Bidders Statement, any interest in: the formation or promotion of SingTel; any property acquired or proposed to be acquired by SingTel in connection with its formation and promotion or in connection with the offer of securities forming part of the consideration for the Offer; or the offer of securities forming part of the consideration for the Offer; and
(ii) no amounts have been paid or agreed to be paid and no benefit has been given or agreed to be given to any of these persons for services rendered by them in connection with the formation or promotion of SingTel or in connection with the offer of securities forming part of the consideration for the Offer. (c) Details of benefits PricewaterhouseCoopers, whose independent accountants report is included in this Bidders Statement, will receive professional fees in the range of S$1.0 million and S$1.5 million in connection with the preparation of that report.
158
O T H E R I N F O R M AT I O N
SingTel Australia will also be entitled to compulsorily acquire all remaining Optus Shares if it has voting power of at least 90% in Optus and holds full beneficial interests in at least 90% by value of all Optus Shares and Optus Options.
159
O T H E R I N F O R M AT I O N
160
O T H E R I N F O R M AT I O N
The Offer is subject to the Australian Treasurer or his representative issuing any approval required under the Financial Sector (Shareholdings) Act 1998 before the end of the Offer Period. (iii) Insurance Acquisitions and Takeovers Act 1991 The Insurance Acquisitions and Takeovers Act 1991 regulates ownership and control of Australian-registered insurance companies. The Offer is subject to the relevant Minister or his representative issuing any approval required under the Insurance Acquisitions and Takeovers Act 1991 before the end of the Offer Period. (iv)ASX The Offer is subject to the ASX approving the listing and quotation of the new SingTel Shares issued pursuant to acceptance of the Offer. SingTel will apply for listing on the ASX and for quotation on the ASXs stock market of SingTel Shares (other than those now held by Temasek, for so long as those SingTel Shares are held by Temasek). (v) SingTel Shareholder approval The Offer is subject to, before the end of the Offer Period, a resolution to approve performance by SingTel or any of its subsidiaries of its obligations in connection with funding the Buy-Back for the purpose of, and all procedures required under, section 76 of the Singapore Companies Act (if it is required by law or by any Government Agency or regulatory authority) being passed and complied with. If the special resolution approving the financial assistance proposed to be given by SingTel to Optus in connection with the Buy-Back Alternative is passed by SingTel Shareholders at the EGM on 29 May 2001, SingTel will be required by the Singapore Companies Act to publish a notice setting out the terms of the resolution in a daily newspaper circulating generally in Singapore within 21 days after the date of the EGM. SingTel intends to publish the required notice on 30 May 2001 or shortly thereafter if the special resolution is passed. The Singapore Companies Act provides that certain specified persons (including SingTel Shareholders and SingTels creditors) may apply to the Singapore courts to oppose the giving of such financial assistance within 21 days after publication of the notice. Accordingly, the procedure for the approval of the financial assistance will be completed after the expiry of that 21 day period if no court application is made to oppose the giving of financial assistance.
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O T H E R I N F O R M AT I O N
(e) to provide that an acquisition by SingTel Australia of a relevant interest in Optus Shares arising from acceptance of the Offer and election of the Buy-Back Alternative and the issue of Optus Shares to SingTel Australia equal to the maximum number of Optus Shares bought back by Optus (i.e. the Placement) are within the exemptions to the prohibition against acquisition of certain relevant interests in voting shares of Optus; (f) to amend the definition of associate in section 9 of the Corporations Law for the purposes of its application in Chapter 6, 6A and 6C; (g) to resolve certain ambiguities in the application of the Corporations Law resulting from anomalies created by the Corporate Law Economic Reform Program Act 1999; (h) to allow notices of variation of the Offer required under section 650D(3) to be signed by an agent of SingTel Australia; (i) to allow technical information relating to the Offer required by section 636(1)(g) of the Corporations Law to be lodged with ASIC and incorporated by reference in the Bidders Statement; (j) to allow SingTel Australia to extend the Offer to Optus Shares issued during the period from the Register Date to the end of the Offer Period under the Employee Share Plans, where the proposal for issue was announced by Optus before 25 March 2001 or the issue is made under the Q1 2001 Plan or Q2 2001 Plan where SingTel Australia has given its consent to the issue before the Instrument Date; (k) to exempt SingTel Australia from the requirement in section 636(3) of the Corporations Law that it obtain the consent of a person before a statement made by that person is included in, or accompanies the Bidders Statement in respect of certain statements contained in public documents or made by an official person; (l) to exempt SingTel Australia from compliance with section 621(3) and 636(1)(h) of the Corporations Law (which relate to certain acquisitions of Optus securities by SingTel Australia and its associates in the four month period prior to the date of the Offer) in respect of any purchase or agreement by (each a Foreign Associate): a related body corporate of SingTel Australia which is operated and managed outside Australia, is an associate of SingTel Australia only because of paragraph (2) of the definition of associate in section 9 of the Corporations Law and is not involved in the planning or progress of the Offer (excluding SingTel and its subsidiaries); or a subsidiary of SingTel which is operated and managed outside Australia, is an associate of SingTel Australia only because of paragraph (a) of the definition of associate in section 9 of the Corporations Law and is not involved in the planning or progress of the Offer (Downstream Foreign Associates),
by reason of a decision made and implemented by a Foreign Associate who acted independently and without direction from SingTel or any SingTel subsidiary. The exemption does not apply where the aggregate number of Optus Shares in which related bodies corporate of SingTel Australia, during the four month period before the date of the Offer, had a relevant interest (other than under the Pre-Bid Agreement) exceeding 5% of the issued Optus Shares or in respect of any relevant purchase or agreement by a Downstream Foreign Associate of which SingTel Australia had actual knowledge prior to lodgment of this Bidders Statement; (m) to exempt SingTel Australia from section 636(1)(k) and 636(1)(l) of the Corporations Law in respect of any Optus securities in which SingTel Australia has a relevant interest because a Foreign Associate has, or commences to have, a relevant interest by means of a decision made and implemented by a Foreign Associate which acted independently and without direction from SingTel or any SingTel subsidiary. The exemption does not apply where the aggregate number of Optus Shares in which related bodies corporate of SingTel Australia, during the four month period before the date of the Offer, had a relevant interest (other than under the Pre-Bid Agreement) exceeding 5% of the issued Optus Shares or in respect of any relevant interest of a Downstream Foreign Associate of which SingTel Australia had actual knowledge prior to lodgment of this Bidders Statement; (n) to disregard for the purposes of the requirements contained in Part 6C.1 of the Corporations Law regarding substantial shareholding notices, relevant interests which
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O T H E R I N F O R M AT I O N
related bodies corporate of SingTel, which are operated and managed outside Australia, are an associate of SingTel only because of paragraph (a) of the definition of associate in Section 9 and are not involved in the planning or progress of the Offer, have in Optus Shares; and (o) to exclude from the prohibition contained in the Corporations Law on defeating conditions the fulfilment of which are in the control of the SingTel Australia or its associates the condition of the Offer relating to shareholder approval required under section 76 of the Singapore Companies Act.
1.1 condition 6 and 2.4 3.8A, 3.9 and 7.36 3.19 15.7
There are some respects in which the Articles of Association of SingTel do not comply with the ASX Listing Rules. The Singapore Companies Act requires all equity shares to have one vote on a poll regardless of the amount unpaid on the share. SingTel Shares held by Temasek will not be quoted nor will future issues of shares to Temasek. SingTel will comply with the ASX Listing Rules for buy-backs it carries out under the Singapore Companies Act as if it was a company under the Corporations Law. SingTels Articles of Association contain provisions imposing a 15% shareholding limit which apply to all persons other than Temasek. SingTel will release information to SGX-ST immediately prior to release to ASX.
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O T H E R I N F O R M AT I O N
As at the date of this Bidders Statement, and as at the date the first Offer is sent, SingTel Australias voting power in Optus was 19.8%.
164
O T H E R I N F O R M AT I O N
(I) to sell the CWAP Acceptance Shares to SingTel Australia for a consideration of A$3.95 per share in accordance with paragraph (i) above; or (II) to sell the CWAP Acceptance Shares into the Competing Offer and pay to SingTel Australia the difference (if positive) between: the price per Optus Share received by CWAP for the CWAP Acceptance Shares from the offeror under the Competing Offer (or where such consideration is not wholly comprised of cash, its A$ cash equivalent); and A$3.95,
multiplied by the number of CWAP Acceptance Shares as soon as practicable upon receipt of the consideration in respect of the disposal of the CWAP Acceptance Shares under the Competing Offer. (B) SingTel Australia may require CWAP to pay to SingTel Australia the greater of: (I) US$100 million; and (II) 50% of the difference (if positive) between: the price per Optus Share received by CWAP for Free Shares disposed of pursuant to the Competing Offer to the offeror under the Competing Offer and where such consideration is not wholly comprised of A$ cash, its A$ cash equivalent; and A$3.95,
multiplied by the number of Free Shares disposed of pursuant to the Competing Offer to the offeror of the Competing Offer as soon as practicable upon receipt of the consideration in respect of the disposal. The Pre-Bid Agreement may be terminated in certain circumstances, including if SingTel does not comply in a material respect with certain of its obligations under the Pre-Bid Agreement or the Implementation Agreement. (b) Other dealings Neither SingTel Australia nor any associate of SingTel Australia has provided, or agreed to provide consideration for an Optus Share in the four months before the date of this Bidders Statement, except pursuant to the Pre-Bid Agreement.
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O T H E R I N F O R M AT I O N
11.20 MISCELLANEOUS
Copies of certain documents have been lodged by SingTel Australia with ASIC Memorandum of Articles of Association of SingTel (see Section 8.3), Separation Deed (see Section 11.3(a)), Implementation Agreement (see Section 11.3(b)), Pre-Bid Agreement (see Section 11.5(a)), Trust Deed relating to the Bonds (see Section 10), and Trust Deed relating to the Unsecured Notes (see Annexure 2) and the modifications and exemptions obtained from ASIC (see Section 11.11). SingTel Australia will provide a copy of those documents free of charge upon request during the Offer Period. The documents may be obtained at the registered office of SingTel in Singapore and also at Level 9, 55 Hunter Street, Sydney NSW 2000 Australia.
166
SECTION 12
DEFINITIONS AND INTERPRETATION
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D E F I N I T I O N S A N D I N T E R P R E TAT I O N
12.1 DEFINITIONS
The following definitions apply in this Bidders Statement and each Acceptance Form, unless the context otherwise requires. Acceptance Form means the acceptance form accompanying this Bidders Statement. Acceptance Shares means those of your Optus Shares that are the subject of an acceptance of the Offer. acquisition of Optus means the acquisition by SingTel Australia of a majority shareholding in Optus as a result of acceptances of the Offer. Agency Agreement means the agency agreement relating to the SingTel Bonds entered into between SingTel and the agents for the SingTel Bonds. Announcement Date means 26 March 2001. Announcement Exchange Rate means A$1 = US$0.4940. ASIC means the Australian Securities & Investments Commission. Associated Company refers to associated and joint venture companies of SingTel (as disclosed under note 31 of the financial statements in Annexure 1). ASX means Australian Stock Exchange Limited. ASX Listing Rules means the Listing Rules of ASX. Australian GAAP means accounting principles generally accepted in Australia. A$ means Australian dollars. A$ Equivalent means the amount of A$ calculated on a Settlement Date by converting (as the case may be): (a) the US$ Cash Alternative; (b) the US$ amount of the Bond Issue Price (calculated by applying the Announcement Exchange Rate) of the SingTel Bond component of the Offer Consideration; or (c) the Market Value of the SingTel Shares component of the Offer Consideration, to A$ by applying the US$/A$ exchange rate expressed as the amount of A$ per US$1 as set on Reuters HSRA page at 9.47am Sydney time on the day prior to the relevant Settlement Date. Bef means Belgian francs. Bidder means SingTel Australia. Bond Issue Price in respect of a SingTel Bond means the amount (expressed in A$ by applying the Announcement Exchange Rate) of: (a) where there is no rounding down of the interest rate on that SingTel Bond from the Formula Rate in accordance with bond market convention, the face value of that SingTel Bond; and (b) where there is a rounding down of the interest rate on the SingTel Bond from the Formula Rate in accordance with bond market convention (the Rounded Rate), the principal amount on which interest at the Formula Rate for the term of that SingTel Bond will equal interest on the face value of that SingTel Bond for the term of that SingTel Bond at the Rounded Rate. Broker means a person who is a share broker and a participant in CHESS. Buy-Back means a selective off market buy-back of Optus Shares to be implemented in compliance with Division 2 of Part 2J.1 of the Corporations Law. Buy-Back Agreement means an agreement in the form set out in Schedule 4 to the Implementation Agreement between Optus and each Optus Shareholder who accepts the Offer and chooses the Buy-Back Alternative and which will be entered into and formed upon acceptance by Optus of that shareholders Buy-Back Offer. Buy-Back Alternative is defined in clause 3.7(a)(ii) of the Implementation Agreement. Buy-Back Consideration is defined in clause 4.5(a) of the Implementation Agreement.
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D E F I N I T I O N S A N D I N T E R P R E TAT I O N
Buy-Back Offer means an offer made by an Optus Shareholder to Optus to sell all or any of its Optus Shares to Optus on the terms of the Buy-Back Agreement which offer is constituted by that shareholders acceptance of the Offer and election of the Buy-Back Alternative. Buy-Back Provisions is defined in Section 9.7(a). CDI means CHESS Depository Instruments. CDN means CHESS Depository Nominees Pty Limited. CDP means The Central Depository (Pte) Limited, a company which operates the computerised central depository system for securities listed on the SGX-ST whereby: (a) documents evidencing title in respect of the listed securities are deposited with the CDP and are registered in the name of CDP or its nominee; (b) accounts are maintained by CDP in the names of the depositors so as to reflect the title of the depositors to the book-entry securities; and (c) transfers of the book-entry securities are effected electronically by CDP making an appropriate entry in the Depository Register of the book-entry securities that have been transferred. CGT means capital gains tax under Australian taxation laws. CHESS means the ASXs Clearing House Electronic Sub-Register System, the central register for electronic transfer of share ownership. CHESS Holding means a holding of Optus Shares on CHESS. Cheque means a cheque drawn on Optus Account. Compulsory Acquisition means compulsory acquisition of Optus Shares under Part 6A.1 of the Corporations Law as modified by ASIC. Controlling Participant means the Broker or Non-Broker Participant who is designated as the controlling participant for shares in a CHESS Holding in accordance with the SCH Business Rules. Corporations Law means the Corporations Law as it applies in New South Wales. CPF means the Singapore Government-administered Central Provident Fund, which provides social security and financial protection benefits mainly to employees in Singapore businesses. Individual employee benefits are funded by regular contributions of a prescribed percentage of the employees employment income. CWAP means Cable & Wireless Australia & Pacific Holdings BV, a company incorporated in the Netherlands. C&W Group means C&W plc and its subsidiaries. C&W plc means Cable and Wireless plc. Defeating Condition is defined in Section 9.12(b). Depository Register means a register maintained by CDP in respect of the book-entry securities. Dividend Record Date means a date in September 2001. EBITDA means earnings before interest, tax, depreciation and amortisation, but after attribution of compensation from the IDA and after share of results of associated and joint venture companies. EGM means the extraordinary general meeting of SingTel Shareholders to be held on 29 May 2001. Employee Share Plans means: (a) the Q1 2001 Plan; (b) the Q2 2001 Plan; (c) Cable & Wireless Optus Special Incentive Scheme; (d) Cable & Wireless Optus Employee Share Offer 2001; and (e) Cable & Wireless Optus Global Senior Management Performance Share Plan.
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D E F I N I T I O N S A N D I N T E R P R E TAT I O N
EOP means the Cable & Wireless Optus Executive Option Plan under which Optus has granted Optus Options to plan participants at an exercise price of A$4.11. First Settlement Date is defined in Section 9.11(a)(i). Foreign Shareholder means an Optus Shareholder who is resident outside Australia and its external territories. Formula Rate of a Bond is the interest rate (expressed as a percent per annum) determined in accordance with Schedule 7 to the Implementation Agreement. GDP means Gross Domestic Product. Government Agency means: (a) a government or government department or other body; (b) a governmental, semi-governmental or judicial person; or (c) a person (whether autonomous or not) who is charged with the administration of a law. HK$ means Hong Kong dollars. IDA means the Info-communications Development Authority of Singapore. Implementation Agreement means the agreement between SingTel and Optus dated 25 March 2001 as amended, extracts from which are set out in Annexure 2. Instrument Date means the date on which the instrument described in Section 11.11(j) was granted by ASIC. Interim Maturity Date is defined in clause 3.6 of the Implementation Agreement. Issuer Sponsored Holding means a holding of Optus Shares on Optus issuer sponsored sub-register. Listing Condition means the condition referred to in Section 9.12(a)(v). Market Day means a day on which the SGX-ST is open for trading of securities. Market Value means the US$ market value of a SingTel Share on a Settlement Date calculated by reference to the S$ closing price of SingTel Shares on the SGX-ST on the day prior to the relevant Settlement Date and converting S$ to US$ by applying the S$/US$ exchange rate expressed as the amount of S$ per US$ as set on Reuters page ABSIRFIX1 at 11.00 am Singapore time on the day prior to the relevant Settlement Date. Minimum Acceptance Condition means SingTel Australia having at any time during or at the end of the Offer Period received acceptances in respect of more than 50% (by number) of all Optus Shares. MSCI Singapore Index means the Morgan Stanley Capital International Singapore (Free) Index which consists primarily of stocks traded on the SGX-ST, and is the free version of the Singapore country index. Morgan Stanley Capital International free indices reflect actual investable opportunities by taking into account local market restrictions on share ownership by foreigners. MSCI World Diversified Telecom Services Index means the Morgan Stanley Capital International World Diversified Telecom Services Index which captures diversified telecommunications services companies in 23 developed markets within the telecommunications services industry group. Non-Broker Participant means a Non-Broker Participant under the SCH Business Rules. Offer means the offer constituted by Section 9 of this Bidders Statement which is made to each and every eligible Optus Shareholder (or, if the context so requires, Section 9 of this Bidders Statement itself) and includes a reference to that offer as varied in accordance with the Corporations Law). Offer Consideration is defined in Section 9.2. Offer Period means the period referred to in Section 9.9. Optus means Cable & Wireless Optus Limited ACN 052 833 208 of 101 Miller Street, North Sydney NSW 2060.
170
D E F I N I T I O N S A N D I N T E R P R E TAT I O N
Optus Financial Information means the financial information of Optus prepared under Australian GAAP based on the significant accounting policies disclosed in the Targets Statement, and used in preparation of the Pro-forma Consolidated Financial Information. Optus Group means Optus and its subsidiaries. Optus Options means options to subscribe for Optus Shares, issued by Optus on or before the Register Date and, in relation to options issued under the EOP and SPP before the Register Date in the circumstances described in Section 4.4(a), means options to accept SingTel Shares in satisfaction and discharge of the exercise of any option rights. Optus Share means a fully paid ordinary share in Optus. Optus Shareholder means a holder of Optus Shares. Partial Redemption Amount means, in respect of any Unsecured Note, any amount paid on the Interim Maturity Date under clause 3.5A(a) of the Implementation Agreement in respect of that Unsecured Note. Placement means an issue of Optus Shares to SingTel Australia for each Optus Share bought back under a Buy-Back Agreement, under the Implementation Agreement (see Section 11.3(b)(i)). PP means Philippines pesos. Pre-Bid Agreement means the agreement entered into by SingTel, C&W plc and CWAP on 25 March 2001. Pro-forma Consolidated Financial Information means the unaudited pro-forma consolidated financial information provided in Section 4.6. Q1 2001 Plan means Cable & Wireless Optus Employee Share Acquisition Plan 2001/Q1. Q2 2001 Plan means Cable & Wireless Optus Employee Share Acquisition Plan 2001/Q2. Redemption Amount means, in respect of an Unsecured Note: (a) if no Partial Redemption Amount has been paid in respect of that Unsecured Note, the Initial Redemption Amount; or (b) otherwise, the difference between the Initial Redemption Amount and the Partial Redemption Amount. Register Date means 19 May 2001 which is the date set by SingTel Australia under section 633(2) of the Corporations Law. Restricted Foreign Shareholders is described in Section 9.11(b). Rights means all accretions and rights attaching to Optus Shares after the date of the Offer (including, but not limited to, all rights to receive dividends and other distributions declared or paid and to receive or subscribe for shares, notes or options issued by Optus). Rp means Indonesian rupiah. SBA means the Singapore Broadcasting Authority. SCH Business Rules means the business rules of the Securities Clearing House, the body which administers the CHESS system in Australia. Second Settlement Date is defined in Section 9.11(a)(ii). Settlement Date means the First Settlement Date or any of the Second Settlement Dates. SGX-ST means the Singapore Exchange Securities Trading Limited. SGX-ST Listing Manual means the listing manual of SGX-ST. Share Alternative is defined in Section 9.2(a)(i). Share and Cash Alternative is defined in Section 9.2(a)(ii). Share, Cash and Bond Alternative is defined in Section 9.2(a)(iii). Singapore Companies Act means the Companies Act of Singapore (Chapter 50).
171
D E F I N I T I O N S A N D I N T E R P R E TAT I O N
Singapore GAAP means accounting principles generally accepted in Singapore. SingTel Board means the board of directors of SingTel. SingTel Bonds means the US$ denominated bonds to be issued by SingTel under the Share, Cash and Bond Alternative. SingTel Securities is defined in Section 9.11(b). SingTel Shareholder means a holder of SingTel ordinary shares. SingTel Shares means fully paid ordinary shares in SingTel. Southern Cross is a fibre optic cable venture in which Optus is a participant, which provides a link between Australia, New Zealand, Fiji, Hawaii and the west coast of the United States. Special Share means the special share in the capital of SingTel with a par value of $0.50, held by the Singapore Minister for Finance (Incorporated), carrying certain special rights and powers as described in Section 8.3(b) of this Bidders Statement. SPP means the Cable & Wireless Optus Super Performance Plan under which Optus has granted Optus Options to plan participants at an exercise price of zero. Subscription Funds is defined in clause 1.1 of the Implementation Agreement. S$ means Singapore dollars. S&P/ASX 200 Index means the Standard & Poors/ASX 200 Index. Takeover Consideration Code means in respect of each Offer Consideration alternative, the code specified for it on the Acceptance Form. TAS means the former Telecommunication Authority of Singapore, the predecessor regulator to the IDA. TCNZ means Telecom Corporation of New Zealand Limited. Temasek means Temasek Holdings (Private) Limited, an investment holding company, wholly owned by the Government of Singapore. THB means Thai baht. Tranche A Bond means a Bond belonging to Tranche A referred to in Schedule 7 to the Implementation Agreement. Tranche B Bond means a Bond belonging to Tranche B referred to in Schedule 7 to the Implementation Agreement. Transaction has the meaning given to that term in the Implementation Agreement. Transfer Alternative is defined in Section 9.6(a)(i). Unconditional Date means the first day on which all of the defeating conditions of the Offer are fulfilled or the Offer is declared by SingTel Australia to be free of all such conditions which have not been fulfilled. United States Shareholder means a resident of or person in the United States that beneficially owns Optus Shares. Unsecured Note means an unsecured note issued by SingTel (or a wholly owned subsidiary of SingTel which is fully guaranteed by SingTel) on the terms described in clauses 3.4, 3.5, 3.5A, 3.5B and 3.6 of the Implementation Agreement. Unsecured Note Provisions is defined in Section 9.5(a). Unsecured Note Trust Deed means the trust deed relating to the Unsecured Notes which is made between SingTel and DBS Trustee Limited for the holders of Unsecured Notes. US$ means United States dollars.
172
D E F I N I T I O N S A N D I N T E R P R E TAT I O N
US$ Cash Alternative means the amount of US$ calculated by converting the A$ cash component of the Offer Consideration to US$ by applying the Announcement Exchange Rate. Virgin Group means Virgin Management Limited and Virgin (Asia) Management Limited, both members of the Virgin group of companies of the United Kingdom. Withholding Tax means, in respect of a payment to an Optus Shareholder or its agent, amounts required to be paid to the Australian Taxation Office pursuant to Part 2-5 of Schedule 1 of the Taxation Administration Act 1953 and other amounts required to be withheld from any payment in accordance with a provision of the Taxation Administration Act 1953, the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936. your Optus Shares means Optus Shares: (a) as to which you are registered on Optus register of members on the Register Date; (b) issued to you during the period from the Register Date to the end of the Offer Period, as a result of the conversion of, or exercise of rights attached to Optus Options on Optus register of option holders on the Register Date; (c) issued to you during the period between from the Register Date to the end of the Offer Period, under Optus Employee Share Plans in accordance with an announcement made by Optus before 25 March 2001 or under the Q1 2001 Plan or Q2 2001 Plan where SingTel Australia has given its consent to the issue before the Instrument Date; or (d) as to which you are able to give good title, in accordance with section 653B of the Corporations Law, at the time you accept this Offer.
12.2 GLOSSARY
Terms referred to in this Bidders Statement and commonly used in the communications industry are set out below. 2G means second generation mobile wireless technologies. 3G means third generation mobile wireless technologies. ADSL means Asymmetric Digital Subscriber Line, a technology that allows combinations of services including voice, data and one way full motion video to be delivered over existing copper feeder distribution and subscriber lines. APCN means the Asia Pacific Cable Network. APCN2 means the Asia Pacific Cable Network 2. ARPU means average revenue per user. ATM means Asynchronous Transfer Mode, a transfer mode in which the information (voice, data and video signals) are organised into cells for transmission. backbone means the part of a communications network that connects main nodes, central offices, or LANs. The backbone usually has its own high-speed protocol, such as switched token ring for LAN interconnections and SDH for central-office and main-node interconnections. bandwidth means the capacity of a communications link. CDMA means Code Division Multiple Access. churn means the transfer of a customers telecommunications service from one supplier to another. Direct Exchange Lines means telephone lines connected directly to a telephone switch. domestic backhaul means the domestic transmission links connecting frontier stations (submarine cable stations and satellite earthstations) to the domestic network or between the frontier stations. DSL means digital subscriber line. dual band means the capability of mobile network infrastructure and handsets to operate across two frequency bands.
173
D E F I N I T I O N S A N D I N T E R P R E TAT I O N
FBO means a person licensed by the IDA as a facilities-based operator to deploy one or more forms of communications network, system or facility to offer communications switching, transmission capacity or communications services to other licensed communications operators, corporates or consumers. fibre optic means a cable made up of strands of extremely fine glass fibres through which signals are transmitted as pulses of light. Gbps means gigabits per second. GPRS means General Packet Radio Service, a non-voice value-added service that allows information to be sent and received across a mobile network. GSM900 means Global System for Mobile Communications 900, a mobile telephone system based on digital transmission, using a bandwidth of 900Hz. GSM1800 means Global System for Mobile Communications 1800, a mobile telephone system based on digital transmission, using a bandwidth of 1800Hz. HFC means hybrid fibre coaxial cable, a system that has the potential to deliver voice, video and data via fibre optic cable for long haul transmission and via coaxial cable for short haul transmission. hub means a collection centre located in an area where telecommunications traffic can be aggregated at a central point for transport and distribution. IDD means international direct dial. INMARSAT means International Maritime Satellite Organisation. INTELSAT means International Telecommunications Satellite Consortium. An international cooperative of more than 135 member nations, it is the worlds largest supplier of commercial satellite services with more than 20 satellites in orbit. Internet data centre means a managed centre for customers to house their data equipment. The data centre provider normally provides round the clock maintenance for the housed equipment. IP means Internet Protocol. ISDN means Integrated Services Digital Networks, providing switched and dedicated integrated access to voice, data and video. ISP means Internet Service Provider, a company that provides access to the Internet for corporate and residential customers by providing the interface to the Internet backbone. JPIX means Japan Internet Exchange. Kbps means kilobits per second. LAN means local area network. LINX means London Internet Exchange. Mbps means megabits per second. MDF means Main Distribution Frames. MVNO means mobile virtual network operator. NMT 900 means Nordic Mobile Telephone System using the 900MHz band. PAIX means Palo Alto Internet Exchange. SBO means a person licensed by the IDA as a services-based operator to lease communications network elements (such as transmission capacity, switching services, ducts and fibre) from FBOs to provide communications services to third parties or to resell the communications services by FBOs. SDH means Synchronous Digital Hierarchy, a standard technology for synchronous data transmission on optical media. SEA-ME-WE2 and SEA-ME-WE3 are cable networks in which SingTel participates, and which provide connectivity between landing points in South East Asia, the Middle East and Western Europe.
174
D E F I N I T I O N S A N D I N T E R P R E TAT I O N
VPN means Virtual Private Network, a virtual network constructed by connecting computers together over the Internet and encrypting their communications. VSAT means Very Small Aperture Terminal. WAN means wide area network. WAP means Wireless Application Protocol, a proposed standard that allows for transfer of data securely between wireless devices such as mobile phones. Wideband CDMA means wideband Code Division Multiple Access, a multi-channel mobile communications digital transmission technology.
175
D E F I N I T I O N S A N D I N T E R P R E TAT I O N
SingTel International means Singapore Telecom International Pte Ltd, a wholly owned subsidiary of SingTel incorporated in Singapore. SingTel IX means SingTel Internet Exchange. SingTel Mobile means Singapore Telecom Mobile Pte Ltd, a wholly owned subsidiary of SingTel incorporated in Singapore. SingTel Paging means Singapore Telecom Paging Pte Ltd, a wholly owned subsidiary of SingTel incorporated in Singapore. SingTel Ventures means SingTel Ventures (Singapore) Pte Ltd (which is incorporated in Singapore) or SingTel Ventures (Cayman) Pte Ltd (which is incorporated in The Cayman Islands). Both are wholly owned subsidiaries of SingTel. SingTel Yellow Pages means SingTel Yellow Pages Pte Ltd, a wholly owned subsidiary of SingTel incorporated in Singapore. Virgin Mobile Asia means Virgin Mobile Asia Pte Ltd, incorporated in Singapore.
12.4 INTERPRETATION
The following interpretation rules apply in this Bidders Statement unless the contrary intention appears. (a) Words and phrases which are defined by the Corporations Law as modified by ASIC for the purposes of the Offer have the same meaning in this document and the Acceptance Form and, if a special meaning is given for the purposes of Chapter 6 or 6A or a provision of Chapter 6 or 6A of the Corporations Law, have that special meaning. (b) Headings are for convenience only and do not affect interpretation. (c) The following rules also apply in interpreting this Bidders Statement and each Acceptance Form, except where the context makes it clear that a rule is not intended to apply. (i) A singular word includes the plural, and vice versa. (ii) A word which suggests one gender includes the other genders. (iii) If a word is defined, another part of speech has a corresponding meaning. (iv) References in this Bidders Statement to Sections are to Sections of this Bidders Statement. (v) References in this Bidders Statement to annexures are to annexures to this Bidders Statement. (vi) A reference to a person includes a reference to a corporation. (vii) Annexures to this Bidders Statement form part of it.
DATED 18 May 2001 SIGNED for and on behalf of SingTel Australia Investment Ltd. following a resolution of the director of SingTel Australia Investment Ltd.
176
ANNEXURE 1
CONSOLIDATED FINANCIAL STATEMENTS
177
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
The following audited consolidated financial statements together with the report of PricewaterhouseCoopers thereon are included in this Appendix. Report of Independent Auditors Audited financial statements for the years ended, and as of, 31 March 2001, 31 March 2000 and 31 March 1999 Consolidated income statements Consolidated balance sheets Consolidated statements of changes in equity Consolidated cash flow statements Notes to the consolidated financial statements
178
179
A U D I T E D F I N A N C I A L S TAT E M E N T S
Consolidated Income Statements For the financial years ended 31 March 2001, 31 March 2000 and 31 March 1999
NOTES 2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
Operating revenue Operating expenses Operating profit Other income Compensation from IDA Share of results of associated companies joint venture companies Profit before interest and tax Interest and investment income Interest on borrowings Profit on ordinary activities before tax Taxation Profit after tax Minority interests Profit before extraordinary items Extraordinary items Profit attributable to shareholders Basic earnings per share (cents) Before extraordinary items After extraordinary items Diluted earnings per share (cents) Before extraordinary items After extraordinary items EBITDA
3 4 5 6 7
4,925.5 (3,036.9) 1,888.6 93.2 337.0 2,318.8 357.8 (8.9) 2,667.7 393.6 (9.1) 3,052.2 (715.1) 2,337.1 (12.9) 2,324.2 (317.9) 2,006.3
4,865.8 (3,013.1) 1,852.7 35.2 1,887.9 352.1 15.4 2,255.4 273.5 (8.1) 2,520.8 (661.5) 1,859.3 (20.4) 1,838.9 701.0 2,539.9
4,883.5 (2,910.4) 1,973.1 31.8 2,004.9 288.2 3.5 2,296.6 314.5 (8.8) 2,602.3 (670.3) 1,932.0 (19.2) 1,912.8 87.0 1,999.8
8 9 10
11
12 15.06 13.00 12 15.06 13.00 13 3,290.2 12.00 16.58 3,037.1 12.54 13.11 2,817.9 12.00 16.58 12.54 13.11
EBITDA represents earnings before interest expense, interest and investment income, taxation, depreciation and amortisation, but after attribution of compensation from IDA and after the share of results of associated and joint venture companies. The accompanying notes on pages 185 to 221 form an integral part of these financial statements. Auditors Report Page 179
180
A U D I T E D F I N A N C I A L S TAT E M E N T S
Consolidated Balance Sheets As at 31 March 2001, 31 March 2000 and 31 March 1999
NOTES 2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
Current assets Cash and cash equivalents Short term investments Trade and other debtors Inventories Non-current assets Property, plant and equipment (net) Associated companies Joint venture companies Long term investments Other non-current assets Total assets Current liabilities Trade and other creditors Borrowings (unsecured) Current income tax Proposed final dividend Non-current liabilities Borrowings (unsecured) Deferred income tax Deferred income Total liabilities Net assets Share capital and reserves Share capital Reserves Interests of shareholders of the Company Minority interests
16 17 18 19
4,095.4 2,533.3 1,228.7 105.0 7,962.4 5,475.8 1,637.2 231.0 782.2 64.0 8,190.2 16,152.6 2,570.6 596.5 640.0 3,807.1 1,000.0 778.1 2,051.4 3,829.5 7,636.6 8,516.0 2,312.0 5,753.7 8,065.7 450.3 8,516.0
4,330.8 1,578.8 890.1 96.3 6,896.0 4,435.6 1,292.1 58.1 1,167.9 67.1 7,020.8 13,916.8 1,662.1 100.1 635.3 633.1 3,030.6 768.2 1,513.2 2,281.4 5,312.0 8,604.8 2,321.0 6,248.7 8,569.7 35.1 8,604.8
4,905.1 1,475.5 859.5 110.0 7,350.1 4,549.1 492.0 28.6 457.9 58.8 5,586.4 12,936.5 1,738.3 0.1 552.3 620.7 2,911.4 100.0 798.4 1,514.3 2,412.7 5,324.1 7,612.4 2,287.5 5,285.6 7,573.1 39.3 7,612.4
20 21 22 23 24
25 26 10 27
26 10 28
29
The accompanying notes on pages 185 to 221 form an integral part of these financial statements. Auditors Report Page 179
181
A U D I T E D F I N A N C I A L S TAT E M E N T S
Consolidated Statements of Changes in Equity For the financial years ended 31 March 2001, 31 March 2000 and 31 March 1999
RETAINED CAPITAL CURRENCY EARNINGS REDEMPTRANSLAAND SHARE SHARE TION TION OTHER NOTES CAPITAL PREMIUM RESERVE ACCOUNT RESERVES TOTAL S$ MILLION S$ MILLION S$ MILLION S$ MILLION S$ MILLION S$ MILLION
Balance at 1 April 2000 Change in accounting policy Restated balance Currency translation differences Goodwill (net) Net charges not recognised in income statement Net profit for the year Total recognised (charges)/gains for the financial year Dividends Issue of share capital Repurchase of shares Balance at 31 March 2001
2 30 30
2,321.0 2,321.0
(47.5) 6,055.1 8,977.9 (408.2) (408.2) (47.5) 5,646.9 8,569.7 (61.8) (61.8) (807.2) (807.2) (61.8) (807.2) (869.0) 2,006.3 2,006.3 (61.8) 1,199.1 1,137.3 (1,500.7) (1,500.7) 1.7 (142.3) (142.3) (109.3) 5,203.0 8,065.7
27 29 29
Balance at 1 April 1999 Change in accounting policy Restated balance Currency translation differences Goodwill (net) Net charges not recognised in income statement Net profit for the year restated (Note 2) Total recognised (charges)/gains for the financial year Dividends Issue of share capital Repurchase of shares Balance at 31 March 2000
2 30 30
2,287.5 2,287.5
0.1 0.1
(24.9) 5,703.9 7,967.9 (394.8) (394.8) (24.9) 5,309.1 7,573.1 (22.6) (22.6) (193.1) (193.1) (22.6) (193.1) 2,539.9 (215.7) 2,539.9
27 29 29
(22.6) 2,346.8 2,324.2 (2,007.2) (2,007.2) 681.4 (1.8) (1.8) (47.5) 5,646.9 8,569.7
Balance at 1 April 1998 Change in accounting policy 2 Restated balance Currency translation differences 30 Goodwill (net) 30 Net gains/(charges) not recognised in income statement Net profit for the year restated (Note 2) Total recognised gains for the financial year Dividends 27 Issue of share capital 29 Balance at 31 March 1999
* denotes amount of less than S$50,000
(52.7) 4,637.3 6,873.2 (352.2) (352.2) (52.7) 4,285.1 6,521.0 27.8 27.8 (355.1) (355.1) 27.8 (355.1) 1,999.8 (327.3) 1,999.8
The accompanying notes on pages 185 to 221 form an integral part of these financial statements. Auditors Report Page 179
182
A U D I T E D F I N A N C I A L S TAT E M E N T S
Consolidated Cash Flow Statements For the financial years ended 31 March 2001, 31 March 2000 and 31 March 1999
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
Cash Flows from Operating Activities Profit before tax and extraordinary items Extraordinary items before tax Adjustments for: Net amortisation income Depreciation of property, plant and equipment (Gain) on dilution of interest in an associated company (Gain)/loss on disposal of property, plant and equipment (Gain) on sale of non-current investments IDA compensation Interest expense Interest and investment income Net provision for diminution in value of non-current investments Property, plant and equipment written off Recovery of investment previously written off Share of joint ventures extraordinary items Share of results of joint venture and associated companies Operating cash flow before working capital changes Change in operating assets and liabilities Trade and other creditors Trade and other debtors Inventories Currency translation adjustments of subsidiary companies Cash generated from operations Dividend received from joint venture and associated companies Interest paid Income tax paid IDA compensation received Net cash inflow from operating activities Cash Flows from Investing Activities Dividends received Funds/(acquisition of interest) from minority shareholders Interest received Investment in joint venture and associated companies Investment in long term investments (Extension)/repayment of long term loans from associated companies Proceeds from disposal of subsidiary, net of cash disposed (See Note (a) below) Payment for purchase of subsidiary, net of cash acquired (See Note (a) below) Net investment in short term investments Payment for purchases of property, plant and equipment Proceeds from sale of non-current investments Proceeds from sale of property, plant and equipment Net cash outflow from investing activities Cash Flows from Financing Activities Proceeds from issue of shares Proceeds from sale and leaseback of assets Repurchase of shares Dividends paid to shareholders Dividends paid to minority shareholders Repayment of term loans Proceeds from bond issue Net cash outflow from financing activities Net (decrease)/increase in Cash and Cash Equivalents Held Cash and Cash Equivalents Held at the Beginning of the Financial Year (Note 16) Cash and Cash Equivalents at the end of the Financial Year (Note 16)
3,052.2 (317.9) 2,734.3 (1.6) 624.1 (28.7) (30.6) (23.3) (337.0) 9.1 (393.6) 389.4 0.1 (22.0) 2.5 (348.9) (160.5) 2,573.8 824.3 (209.0) (7.8) 24.2 3,205.5 43.0 (8.1) (565.9) 859.0 3,533.5 33.2 367.1 214.6 (1,113.0) (126.4) (32.3) (35.4) (0.2) (782.5) (1,762.0) 87.3 97.5 (3,052.1) 1.7 17.8 (142.3) (1,493.8) (0.1) (100.0) 1,000.0 (716.7) (235.3) 4,330.7 4,095.4
2,520.8 777.1 3,297.9 (1.1) 782.8 0.2 (781.9) 8.1 (273.5) 4.8 1.4 (367.5) (626.7) 2,671.2 (91.3) (41.4) 13.7 (1.7) 2,550.5 39.6 (7.8) (463.6) 2,118.7 8.7 (304.3) 235.7 (736.5) (823.6) 43.7 (71.8) (786.5) 1,014.8 42.0 (1,377.8) 681.4 (1.8) (1,994.8) (0.1) (1,315.3) (574.4) 4,905.1 4,330.7
2,602.3 87.0 2,689.3 (0.4) 521.7 (25.3) 5.2 (138.8) 8.8 (314.5) 77.1 0.8 (291.7) (157.1) 2,532.2 (5.8) 44.8 28.4 12.1 2,611.7 35.5 (10.3) (561.2) 2,075.7 18.9 170.5 300.3 (591.9) (12.1) (43.9) (3.2) (867.9) 344.9 22.2 (662.2) 0.3 9.8 (564.2) (66.3) (620.4) 793.1 4,112.0 4,905.1
The accompanying notes on pages 185 to 221 form an integral part of these financial statements. Auditors Report Page 179
183
A U D I T E D F I N A N C I A L S TAT E M E N T S
Consolidated Cash Flow Statements (continued) For the financial years ended 31 March 2001, 31 March 2000 and 31 March 1999 (a) Acquisition and disposal of subsidiary companies During the financial year ended 31 March 2001, the Groups interest in First Cube Pte Ltd was increased from 50% to 72.92% for a cash consideration of S$4.6 million. Pursuant to a merger with Asia2B.com Holdings Limited during the financial year ended 31 March 2001 the Group exchanged its 89% equity interest in SESAMi.com Pte Ltd group for a 44.5% equity interest in SESAMi Inc. The details of the acquisition and disposal were as follows:
ACQUISITION S$ MILLION DISPOSAL S$ MILLION
Fair values of identifiable net assets of the subsidiary acquired/disposed Non-current assets Cash Current assets Current liabilities Less: Minority interest Share of net assets retained in Group Goodwill Total consideration paid in cash Less: Cash in subsidiary acquired/disposed Outflow of cash
4.4 1.8 (0.7) 5.5 (1.5) 4.0 0.6 4.6 (4.4) 0.2
(6.1) (35.4) (9.8) 5.1 (46.2) 10.4 44.3 8.5 (8.5) 35.4 35.4
The accompanying notes on pages 185 to 221 form an integral part of these financial statements. Auditors Report Page 179
184
A U D I T E D F I N A N C I A L S TAT E M E N T S
Notes to the Financial Statements 31 March 2001, 31 March 2000 and 31 March 1999 These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
185
A U D I T E D F I N A N C I A L S TAT E M E N T S
186
A U D I T E D F I N A N C I A L S TAT E M E N T S
187
A U D I T E D F I N A N C I A L S TAT E M E N T S
Buildings Transmission plant and equipment Switching equipment Postal equipment Other fixed assets
5 5 3 10 3
30 20 10 12
No depreciation is provided on freehold land, long-term leasehold land with remaining lease period of more than 100 years and capital work-in-progress. Leasehold land with remaining lease period of 100 years or less is depreciated in equal instalments over its remaining lease period. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down to its recoverable amount. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are expensed. (j) Intangible assets (i) Research and development Development expenditure attributable to major projects, whose future returns are reasonably assured, is capitalised and amortised over the estimated useful life of the product. Expenditure on pure research is written off to the income statement in the year in which it is incurred, except for items of a capital nature which are capitalised as property, plant and equipment. The depreciation charge of these assets are taken to the income statement. Depreciation rates of property, plant and equipment utilised for research and development activities are reviewed annually to take into account technological obsolescence and possible future benefits to the Group.
188
A U D I T E D F I N A N C I A L S TAT E M E N T S
189
A U D I T E D F I N A N C I A L S TAT E M E N T S
190
A U D I T E D F I N A N C I A L S TAT E M E N T S
191
A U D I T E D F I N A N C I A L S TAT E M E N T S
Restatement of retained earnings at the beginning of the financial year Included as a restatement of the results for the financial year Cumulative impact on retained earnings at the end of the financial year
408.2 408.2
2001 S$ MILLION
3 OPERATING REVENUE
Operating revenue comprised: International telephone Public data and private network Mobile communications National telephone Information technology and engineering services Postal services Sale of equipment Directory advertising Others 1,203.1 1,065.0 885.5 588.0 480.1 341.0 166.7 107.2 88.9 4,925.5
2001 S$ MILLION
1,644.7 763.0 851.3 572.7 383.5 322.6 149.9 97.1 81.0 4,865.8
2000 S$ MILLION
1,843.7 620.6 880.0 546.6 340.9 307.9 138.2 125.8 79.8 4,883.5
1999 S$ MILLION
4 OPERATING EXPENSES
Operating expenses comprised: Traffic expenses Staff costs Depreciation of property, plant and equipment Selling and administrative costs Cost of goods sold Repair and maintenance Recoveries 665.4 666.6 624.1 591.5 461.8 83.9 (56.4) 3,036.9
2001
N U M B E R O F S TA F F
13,444
12,636
12,637
192
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
5 OPERATING PROFIT
Operating profit is arrived at after charging/(crediting): Auditors remuneration: Auditors of the Company Other auditors Non-audit fees paid to: Auditors of the Company Other auditors Bad trade debts written off Directors remuneration (Note 15) Paid by the Company Paid by subsidiary companies Provision/(Writeback of provision) for doubtful debts third parties (trade) third parties (non-trade) associated and joint venture companies Provision/(Writeback of provision) for inventory obsolescence Research and development expenses written off Inventories written off Rental expenses (for operating leases)
* denotes amounts of less than S$50,000. 2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
0.8 0.2 1.3 0.1 0.7 1.5 0.1 40.1 0.3 (0.3) 0.8 * 0.9 34.4
0.6 0.2 1.4 0.1 4.2 1.0 0.1 57.6 (0.6) 0.1 (1.6) 0.9 2.2 27.6
0.5 0.1 0.7 0.1 0.2 0.9 0.1 87.2 19.4 1.5 10.5 0.2 6.3 20.8
6 OTHER INCOME/(LOSS)
Amortisation of gain on sale and leaseback arrangement Bad trade debts recovered Gain on disposal of property, plant and equipment Rental income Property, plant and equipment written off Loss on disposal of property, plant and equipment Net exchange (loss)/gain (trade related) Others 1.6 1.8 48.3 24.2 (0.1) (17.7) (3.6) 38.7 93.2
2001 S$ MILLION
The Infocommunications Development Authority of Singapore (IDA) has made two payments to SingTel to compensate for the modifications to its original licence for the accelerated liberalisation of the telecommunications market. The IDA paid SingTel S$1.5 billion in 1997 and S$859 million in 2000. SingTel accounts for these payments as deferred income in the Balance Sheet, and recognises them on a straight line basis over seven years from 1 April 2000, reflecting the period by which SingTels original monopoly licence period was shortened. The Inland Revenue Authority of Singapore has informed SingTel and the IDA that the compensation payments are not subject to income tax. The IDA has claimed that the first compensation payment was calculated on the basis that it would be taxable and that the assumed tax component was S$388 million. The IDA has asked SingTel to repay the amount of that assumed tax component. SingTel has sought appropriate legal advice on the merits of the claim and disputes the IDAs claim. Pending resolution of the dispute, SingTel has not made any provision in its financial statements regarding the IDAs claim. The dispute does not affect the second payment of S$859 million.
193
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
1.1 174.1 53.3 228.5 8.8 13.4 0.1 56.8 20.6 (64.3) 9.6 273.5
2000 S$ MILLION
1.4 229.3 54.2 284.9 (0.1) 18.1 0.2 (38.8) 57.7 (21.1) 13.6 314.5
1999 S$ MILLION
9 INTEREST ON BORROWINGS
Interest expense incurred bank loans bonds loan from a minority shareholder others
* denotes amounts of less than S$50,000. 2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
10 TAXATION
(a) Tax expense Tax expense attributable to profit is made up of: Current income tax Singapore Foreign Deferred income tax As reported Prior year adjustment (Note 2)
523.9 3.2 527.1 40.0 40.0 567.1 (30.1) 537.0 174.7 3.4 715.1
545.2 1.4 546.6 (19.8) 13.4 (6.4) 540.2 (5.6) (18.2) 516.4 143.6 1.5 661.5
492.1 3.0 495.1 85.7 42.6 128.3 623.4 (57.9) 0.6 566.1 104.1 0.1 670.3
Adjustment in respect of preceding financial year Current income tax 10% corporate tax rebate others Deferred income tax change in corporate tax rate others Share of taxes of associated companies Share of taxes of joint venture companies
The income tax expense on the results of the Group for the year differs from the amount of income tax determined by applying the Singapore standard tax rate of 24.5% (2000: 25.5%, 1999: 26%) to profit before tax due to certain items not being taxable, offset by higher tax rates in the jurisdiction of some of the companies in which the Group operates. As at 31 March 2001, the Group has estimated unutilised tax losses of approximately S$31.8 million (2000: S$31.8 million, 1999: S$125.1 million) and unutilised wear and tear allowances of approximately S$15.6 million (2000 and 1999: Nil) available for set off against future taxable income, subject to the provisions of the income tax regulations of the respective countries in which the Group operates.
194
A U D I T E D F I N A N C I A L S TAT E M E N T S
10 TAXATION (CONTINUED)
The deferred tax benefit amounting to S$14.2 million (2000: S$8.1 million, 1999: S$32.5 million) of the unutilised tax losses and wear and tear allowances has not been recognised in the financial statements. During the financial year, certain carryforward tax losses of subsidiary companies not recognised previously in the financial statements were utilised, resulting in tax savings of approximately S$4.4 million (2000: S$23.8 million, 1999: S$3 million).
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
(b) Movements in provision for current tax Balance as at 1 April Income tax paid Current financial years tax expense on profit Overprovision in prior financial years Balance as at 31 March (c) Movements in provision for deferred tax Balance as at 1 April, as previously reported Prior year adjustments (Note 2) Balance as at 1 April, restated Provision/(writeback) in respect of profit for the year Overprovision in prior year Change in tax rate Transfer from/(to) income statement Balance as at 31 March
635.3 (565.9) 527.1 596.5 360.0 408.2 768.2 40.0 (30.1) 9.9 778.1
2001 S$ MILLION
552.3 (463.6) 546.6 635.3 403.6 394.8 798.4 (6.4) (18.2) (5.6) (30.2) 768.2
2000 S$ MILLION
676.0 (561.5) 495.1 (57.3) 552.3 317.9 352.2 670.1 128.3 128.3 798.4
1999 S$ MILLION
11 EXTRAORDINARY ITEMS
The extraordinary items (EI) comprise: Profit on sale of non-current investments Provision for diminution in value of non-current investments Writeback of provision for diminution in value of non-current investments Gain on deemed disposal of associated companies Recovery of investment in subsidiary previously written off Share of joint ventures EI Less: Foreign tax on profit on sale of non-current investments 23.3 (426.1) 36.7 28.7 22.0 (2.5) (317.9) (317.9) 781.9 (112.0) 107.2 777.1 (76.1) 701.0 138.8 (77.1) 25.3 87.0 87.0
Non-current investments referred to above comprise investments in associated and joint venture companies and long term investments.
195
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
Basic earnings per share (before extraordinary items) is calculated by dividing the Groups profit after tax and minority interests but before extraordinary items by the weighted average number of ordinary shares in issue during the financial year. Basic earnings per share (after extraordinary items) is calculated by dividing the Groups profit after extraordinary items by the weighted average number of ordinary shares in issue during the financial year. For the diluted earnings per share, the weighted average number of ordinary shares in issue has been adjusted to assume conversion of all dilutive potential ordinary shares from the share options granted to employees. In determining the diluted earnings per share, a calculation is performed to determine the number of shares that could have been acquired at market price (determined as the average annual share price of the Companys shares) based on the exercise price of the outstanding share options. This calculation serves to determine the unpurchased shares to be added to the ordinary shares outstanding for the purpose of computing the dilution. For the share options calculation, no adjustment is made to the Groups profits. As disclosed in Note 2, the Group had changed its accounting policy with respect to accounting for deferred tax. For comparative purposes, the basic earnings per share and diluted earnings per share for the financial years ended 31 March 2000 and 1999 have been restated for the prior year adjustment arising from this change in accounting policy.
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
196
A U D I T E D F I N A N C I A L S TAT E M E N T S
Information technology services rendered Postal services rendered Telecommunications services rendered Utilities charged incurred
For the purpose of the Consolidated Cash Flow Statements, the year-end consolidated cash and cash equivalents comprise the following:
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
Cash and bank balances (as above) Less: Bank overdraft (unsecured) Cash and cash equivalents per Consolidated Cash Flow Statements
4,095.4 4,095.4
4,905.1 4,905.1
197
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
(c) Certain subsidiaries of the Group are participating lenders of a Securities Lending Program administered by a financial institution acting as an agent. The agent collects cash and other securities from borrowers as collateral and this collateral will be at agreed percentage above the market value of the securities lent out. Marking to market of collateral is performed every business day and the borrower is required to deliver additional collateral when necessary. Income earned from the investment of cash collateral and the loan fees for loans collateralised by non-cash collateral are distributed to the participating lenders by the agent.
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
The amount of securities loaned to financial institutions included in the balances above is as follows: Quoted equity investments Other quoted investments Share of the collateral in cash and other securities received by the agent in respect of securities loaned (at market value) (d) The movements in the provision for diminution in value of short term investments during the year are as follows: Balance as at 1 April Add: Provision/(writeback of provision) Balance as at 31 March
164.1
184.7
43.7 43.7
20.6 (20.6)
198
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
The non-trade balances with the associated and joint venture companies are unsecured, interest-free and repayable on demand.
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
(b) The movements in the provision for doubtful trade debtors during the financial year are as follows: Balance as at 1 April Provision for the year Less: Bad debts written off against provision Balance as at 31 March (c) The movements in the provision for doubtful other debtors during the financial year are as follows: Balance as at 1 April Provision/(Writeback of provision) for the year Less: Bad debts written off against provision Balance as at 31 March (d) The movements in the provision for doubtful receivables from associated and joint venture companies during the financial year are as follows: Balance as at 1 April (Writeback of)/provision for the year Less: Bad debts written off against provision Balance as at 31 March
* denotes amounts of less than S$50,000
19 INVENTORIES
Inventories at cost: Consumable stores and raw materials Equipment held for resale Work-in-progress (information technology projects) Directories in process of publication Published directories Less: Provision for inventory obsolescence The movements in the provision for inventory obsolescence during the financial year are as follows: Balance as at 1 April Provision/(writeback of provision) for the year Less: Amount written off against provision Balance as at 31 March 22.0 34.3 50.8 1.1 5.3 113.5 (8.5) 105.0 22.9 57.6 14.6 6.0 6.2 107.3 (11.0) 96.3 30.7 71.9 12.3 7.2 6.7 128.8 (18.8) 110.0
199
2001
TOTAL S$ MILLION
A U D I T E D F I N A N C I A L S TAT E M E N T S
409.7
1,278.8
5,475.8
200
2000
TRANSMISSION PLANT AND EQUIPMENT S$ MILLION SWITCHING EQUIPMENT S$ MILLION POSTAL EQUIPMENT S$ MILLION OTHER FIXED ASSETS S$ MILLION
TOTAL S$ MILLION
A U D I T E D F I N A N C I A L S TAT E M E N T S
Cost Balances as at 1 April 1999 Translation adjustments Additions Disposals Reclassifications/Adjustments Total as at 31 March 2000 Accumulated Depreciation Balances as at 1 April 1999 Translation adjustments Charge for the year Disposals Reclassifications/Adjustments Total as at 31 March 2000 Net book value as at 31 March 2000
201
1999
TOTAL S$ MILLION
A U D I T E D F I N A N C I A L S TAT E M E N T S
340.1
837.3
4,549.1
Included in the property, plant and equipment of the Group are certain telecommunications equipment with net book value of S$344.5 million (2000: S$263.4 million, 1999: S$318.7 million) which were sold and leased back.
As part of its annual review process, the Group assessed the recoverable amounts of certain transmission plant and equipment and switching equipment in the light of technological improvements and changing business trends. After taking into account the replacement costs or the expected future cash flows from these assets discounted to their present values, a one-off accelerated depreciation charge of S$50.3 million (2000: S$245.4 million, 1999: S$89.7 million) for the Group was made and included in the depreciation expense for the year.
202
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
21 ASSOCIATED COMPANIES
(a) Investments: Quoted equity shares, at cost Market value: S$1,639.5 million (2000: S$2,050.0 million, 1999: S$1,178.2 million) Unquoted equity shares, at cost Shareholders loans 961.4 877.1 1,562.3 2,439.4 (1,381.3) (53.1) 297.1 1,302.1 (10.0) 1,292.1 854.2 956.7 43.7 1,854.6 (1,464.6) (28.5) 146.1 507.6 (15.6) 492.0
2,541.6 39.8 3,542.8 Goodwill on consolidation taken to shareholders equity (2,223.0) Currency translation adjustments (138.9) Share of post acquisition reserves (net of dividends received) 456.3 1,637.2 Less: Provision for diminution in value 1,637.2
The shareholders loans to associated companies are unsecured, interest free and include an amount of S$39.5 million (2000 and 1999: Nil) which will be converted to equity shares in an associated company within the next 12 months upon completion of restructuring of the associated company.
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
(b) Movements in the provision for diminution in value of investments in associated companies are as follows: Balance as at 1 April Less: Writeback of provision Release upon disposal of investment Balance as at 31 March
10.0 (10.0)
15.6 15.6
The details of the associated companies are set out in Note 31.
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
Included in the currency translation adjustments are amounts relating to certain joint venture companies, totalling S$44.5 million (2000 and 1999: S$44.5 million) which were reversed from currency translation account. Provision for diminution in value of similar amounts was made in respect of these investments. The shareholders loans to joint venture companies are unsecured, interest-free and are not expected to be repaid within the next 12 months. The details regarding the joint venture companies are set out in Note 31.
203
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
Staff loans are repayable with interest in equal monthly instalments over periods of up to 30 years for housing loans and up to 8 years for other loans with an average interest rate ranging between 4% and 5.5% (2000 and 1999: 4% to 5.5%) per annum. Included in staff loans are loans to directors of subsidiary companies of S$3.4 million (2000: S$6.7 million, 1999: S$6.5 million) for the Group.
204
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
The non-trade balance due to a joint venture company at 31 March 2001 and the non-trade balance due to associated company at 31 March 1999 are unsecured, interest-free and have no fixed terms of repayment.
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
26 BORROWINGS (UNSECURED)
Current Bonds Long term bank loans due within one year Bank overdrafts Non-current SingTel bonds Bonds 1,000.0 1,000.0 100.0 0.1 100.1 0.1 0.1 100.0 100.0
On 15 March 2001, the Company issued a five-year fixed interest unsecured bond of S$1 billion (SingTel bond) due 2006, carrying interest at 3.21% per annum. The unsecured bonds as at 31 March 2000 and 31 March 1999 carried interest at 4 31/32% per annum for both years and were redeemed on 1 February 2001.
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
27 DIVIDENDS
Ordinary dividends proposed Final proposed of 5.5 cents (2000 and 1999: 5.5 cents) per share, proposed net of tax at 24.5% (2000: 25.5%, 1999: 26%) Adjustment Writeback of overprovision of final dividend proposed in the prior year as a result of share repurchase Special dividends paid Special dividend of 7.5 cents (2000: 12 cents, 1999: Nil) per share, paid net of tax at 25.5% (2000: 26.0%)
28 DEFERRED INCOME
Deferred IDA compensation at 31 March (Note 7) Gain on sale and leaseback arrangement Balance as at 1 April Amount deferred during the year Amount recognised as income during the year Balance as at 31 March Total deferred income 2,022.0 13.2 17.8 (1.6) 29.4 2,051.4 1,500.0 14.3 (1.1) 13.2 1,513.2 1,500.0 4.9 9.8 (0.4) 14.3 1,514.3
Gain on sale and leaseback of certain telecommunications equipment is recognised as income over lease periods of 11 to 16 years.
205
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
29 SHARE CAPITAL
Authorised: 33,333,333,330 ordinary shares of S$0.15 each and 1 Special Share of S$0.50 Issued and fully paid: Ordinary shares at S$0.15 each (Shares) Balance as at 1 April 15,473,154,226 (2000: 15,249,938,788, 1999: 15,249,816,788) Shares Issue of 787,900 (2000: 223,932,438, 1999:122,000) Shares Repurchase of 60,778,000 (2000: 717,000, 1999: Nil) Shares Balance as at 31 March 15,413,164,126 (2000: 15,473,154,226, 1999: 15,249,938,788) Shares 1 Special Share at S$0.50
* denotes amount of less than S$50,000
5,000.0
5,000.0
5,000.0
Issue of new shares During the financial year, the Company issued 787,900 (2000: 2,621,540, 1999: 122,000) Shares, fully paid in cash under the Singapore Telecom Executives Share Option Scheme (1994 Scheme) at premiums of between S$1.90 and S$2.15 per share. Total share premium arising from these share issues is S$1.6 million (2000: S$6.0 million, 1999: S$0.3 million). In addition, 221,310,898 Shares were issued at a premium of S$2.90 (total : S$641.8 million) per share for cash in the financial year ended 31 March 2000 in conjunction with the subscription of shares in KDDI Corporation (formerly known as KDD Corporation). Outstanding share options As at 31 March 2001, there were 54,456,931 (2000: 19,460,831, 1999: 12,768,691) unissued ordinary shares of S$0.15 each of the Company under options granted pursuant to both the 1994 Scheme and the Singapore Telecom Share Option Scheme 1999 at exercise prices ranging from S$2.05 to S$3.03 per share. Share repurchase On 29 September 1999, the shareholders at the Extraordinary General Meeting of the Company approved the mandate for the Company to purchase or acquire its issued ordinary shares, subject to certain conditions as detailed in the Companys circular to Members dated 13th August 1999 (the Share Purchase Mandate). The Group believes that share repurchase is an expedient, effective and cost-effective way for the Company to return surplus cash which is in excess of the financial and possible investment needs of the Group to shareholders. During the financial year, the Company repurchased 60,778,000 (2000: 717,000, 1999: NIL) of its issued ordinary shares of S$0.15 each at average market price of S$2.34 (2000: S$2.44, 1999: NIL) per share from the open market. The repurchase transactions were financed by internally generated funds. The total cash paid for the ordinary shares of S$142.3 million (2000: S$1.8 million, 1999: NIL) was credited against revenue reserve (Note 30). These shares are deemed to be cancelled and an amount equivalent to their nominal value was transferred to the capital redemption reserve in accordance with Section 76G of the Singapore Companies Act. Special Share The Special Share enjoys all the rights attached to ordinary shares. In addition, pursuant to Article 4 of the Articles of Association, no resolution may be passed on certain matters without the prior written approval of the Special Member. Subsequent to the financial year-end, the Special Member served a written notice to the Company of its intention to surrender all its rights attached to the Special Share. The Special Share will be converted at its nominal amount into one ordinary share of S$0.15 in the capital of the Company once the Articles of the Company are modified.
206
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
30 RESERVES
Currency translation account Balance as at 1 April Net exchange (losses)/gains during the financial year Exchange differences realised upon sale of non-current investments Exchange differences reversed on provision for diminution in value of non-current investments Balance as at 31 March Retained earnings and other reserves Balance as at 1 April, as previously reported Prior year adjustments (Note 2) Balance as at 1 April, restated Profit attributable to shareholders Dividends (Note 27) Repurchase of shares Capital reserve on consolidation Goodwill on consolidation realised upon disposal of non-current investments Goodwill on acquisition of non-current investments during the financial year Balance as at 31 March (47.5) (61.8) (109.3) (24.9) (21.4) (1.2) (47.5) (52.7) 29.6 (0.4) (1.4) (24.9)
6,055.1 (408.2) 5,646.9 2,006.3 (1,500.7) (142.3) 83.7 1.6 (892.5) (807.2) 5,203.0
5,703.9 (394.8) 5,309.1 2,539.9 (2,007.2) (1.8) 60.6 (253.7) (193.1) 5,646.9
Non-current investments referred to above comprise investments in joint venture and associated companies.
207
A U D I T E D F I N A N C I A L S TAT E M E N T S
COUNTRY OF INCORPORATION AND PLACE OF BUSINESS PERCENTAGE OF EFFECTIVE EQUITY HELD BY THE GROUP % 2001 2000 1999
NAME OF COMPANIES
PRINCIPAL ACTIVITIES
Subsidiary Companies Held by the Company C2C Asiapac Pte Ltd (formerly known as SingTel Global Multimedia Pte Ltd) # GB21 (Hong Kong) Limited ICO Investment (Singapore) Private Limited InnoVoice Services Private Limited ## INS (Europe) Limited INS Holdings Pte Ltd @ InfoCom Holding Company Pte Ltd KA Land Pte Ltd @ Mercurix Pte Ltd National Computer Systems Private Limited Sembawang Cable Depot Pte Ltd Singapore Post Private Limited Singapore Telecom America, Inc. Singapore Telecom ADSB (Netherlands Antilles) N.V. ## Singapore Telecom Europe Ltd # Singapore Telecom Hong Kong Limited # Singapore Telecom India Private Limited Singapore Telecom International Pte Ltd
Singapore
100
100
100
Provision of telecommunications Hong Kong services and products. Investment holding company. Singapore Dormant. Singapore
100 100 100 100 100 100 100 100 60 100** 100 90 100 100 100 100
100 100 100 100 100 100 100 60 100** 100 90 100 100 100
Dormant. United Kingdom 100 Investment holding Singapore 100 and provision of telecommunications services. Investment holding company. Singapore 100 Investment holding company. Provision of data communication services. Provision of information technology and consultancy services. Provision of storage facilities for submarine telecommunications cables and related equipment. Operation and provision of postal services. Investment holding company. Investment holding company. Singapore Singapore Singapore Singapore Singapore USA 100 100 100 60 100** 100
# #
Singapore Telecom Japan Co Ltd Singapore Telecom Korea Limited Singapore Telecom Mobile Pte Ltd Singapore Telecom Paging Pte Ltd Singapore Telecom Taiwan Limited Singapore Telecom USA, Inc. SingaSat Pte Ltd SingNet Pte Ltd SingTel Aeradio Pte Ltd
Provision of administrative, technical and advisory services. Investment holding Hong Kong 100 and provision of telecommunications services. Provision of telecommunications India 100 services and all related activities. Holding of strategic investments Singapore 100 in companies engaged in the field of telecommunications, and provision of technical and management consultancy services in the field of telecommunications. Provision of telecommunications Japan 100 services and all related activities. Provision of telecommunications Korea 100 services and all related activities. Provision of mobile phone Singapore 100 services. Provision of paging, public Singapore 100 mobile data and radio trunk repeater services. Provision of customer services Taiwan 100++ for telecommunications related activities. Provision of administrative, USA 100 technical and advisory services in the USA. Investment holding company. Singapore 100 Provision of value-added Singapore 100 services and internet-related services. Provision of facilities Singapore 100 management and consultancy services and distributor of specialised telecommunications and data communication products.
208
A U D I T E D F I N A N C I A L S TAT E M E N T S
COUNTRY OF INCORPORATION AND PLACE OF BUSINESS PERCENTAGE OF EFFECTIVE EQUITY HELD BY THE GROUP % 2001 2000 1999
NAME OF COMPANIES
PRINCIPAL ACTIVITIES
Subsidiary Companies Held by the Company SingTel Asian Investments Pte Ltd SingTel Australia Holding Pte Ltd SingTel (Europe) Limited SingTel Global Services Private Limited SingTel Investments Private Limited SingTel i2i Private Limited SingTel Japan Co., Ltd SingTel (Jersey) Private Limited SingTel Mobile Satellite Pte Ltd SingTel (Netherlands Antilles) Pte N.V. SingTel (Philippines), Inc. SingTel Ventures (Cayman) Pte Ltd SingTel Ventures (Singapore) Pte Ltd SingTel Yellow Pages Pte Ltd SingTelSat Pte Ltd
Investment holding company. Investment holding company. Telecommunication business in United Kingdom. Dormant.
Singapore Singapore
100 100
100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
100 100 100 100 100 100 100 100 100 100 100 100 100 100
United Kingdom 100 Singapore Singapore Mauritius Japan Jersey Singapore Netherlands 100 100 100 100 100 100 100 100 100 100 100 100
# #
Portfolio investment holding company. Investment holding company. Engaged in telecommunications services business and all other related businesses. Portfolio investment holding company. Investment holding company. Liquidated.
Sudong Sdn Bhd Telecom Equipment Pte Ltd Held by Subsidiary Companies C2C Marine Pte Ltd
Provision of customer services Philippines for telecommunications related activities. Venture capital investments in Cayman Islands start-up technology and telecommunications companies. Venture capital investments in Singapore start-up technology and telecommunications companies. Provision of directory Singapore advertising and publishing. Provision of satellite capacity Singapore for telecommunication and video broadcasting services. Provision of data processing Peoples and programming services for Republic holding company and technical of China services related to telecommunications information services. The management, provision Malaysia and operations of a call centre for telecommunication services. Engaged in the sale Singapore and maintenance of telecommunications equipment.
100 100
100 100
100 100
Chapter-e.com Pte Ltd DataPost Pte Ltd ^##First Cube Pte Ltd Global Page Pte Ltd +## Guangzhou Zhong Sheng Information Technology Co Ltd
Owning, operating and Singapore 59.5 managing of maintenancecum-laying cableships. Operation and provision of Bermuda 59.5 telecommunications facilities and services utilising a network of submarine cable systems and associated terrestrial capacity. Operation and provision of Singapore 59.5 telecommunications facilities and services utilising a network of submarine cable systems and associated terrestrial capacity. Engaged in e-commerce services. Singapore 51 Provision of electronic printing Singapore 70 and despatching services. Provider of internet-enabled Singapore 72.9 storage units. Marketing, implementing and Singapore 100 operating radio paging systems and investment holdings. Approved training centre for Peoples Republic 70 Microsoft and Cisco products. of China
51 70 50 100
70 100
209
A U D I T E D F I N A N C I A L S TAT E M E N T S
COUNTRY OF INCORPORATION AND PLACE OF BUSINESS PERCENTAGE OF EFFECTIVE EQUITY HELD BY THE GROUP % 2001 2000 1999
NAME OF COMPANIES
PRINCIPAL ACTIVITIES
Subsidiary Companies Held by Subsidiary Companies ## Information Network Services Sdn Bhd
Provision of data Malaysia 100 communication and value added network services. ## Integrated Data Services Engaged in the business of Myanmar 90 Limited printing, publishing and advertising. # Integrated Information Publication of directories and Hong Kong 100 (Hong Kong) Limited sale of advertising space in directories. # Integrated Information (M) Engaged in the sale of Malaysia 100 Sdn Bhd advertising space in overseas telephone and telex directories, magazines and periodicals. # Integrated Media Services Under voluntary liquidation. Taiwan 100 (Taiwan) Co Ltd Info Ad Publishing Provision of consultancy and Singapore 100 Consultants Private market research in information Limited technology, directory advertising and publishing. ## Lanka Communication Provision of data Sri Lanka 82.9 Services (Private) Limited communication services. ## NCS Information Engaged in information Peoples Republic 100 Technology (Suzhou) system software development of China Co. Ltd services. # NCSI (Australia) Pty Ltd Provision of information Australia 100 technology services. NCSI Holdings Pte Ltd Investment holding company. Singapore 100 # NCSI Holdings (Malaysia) Investment holding company. Malaysia 100 Sdn Bhd # NCSI (Malaysia) Sdn Bhd Provision of information Malaysia 100 technology services. # NCSI (HK) Limited Provision of information Hong Kong 100 technology services. # NCSI (India) Private Limited Provision of information India 100 technology services. ^^^ Print and Mail Printing and distribution of Singapore ^^^ Intercontinental (Asia) international mail. Pte Ltd # Pastel Limited Investment holding company. Mauritius 100 ^^ SESAMi.com Pte Ltd Engaged in e-commerce Singapore ^^ services. ^^#SESAMi.com (Australia) Engaged in e-commerce Australia ^^ Pty Limited services. ^^#SESAMi.com (HK) Limited Engaged in e-commerce Hong Kong ^^ services. +##Shanghai Zhong Sheng Provision of product reselling, Peoples Republic 70 Information Technology training and software of China Co. Ltd development, consultancy and representation. Singapore Post Enterprise Investment holding company. Singapore 100 Private Limited ## Singapore Telecom Provision of consultancy United Kingdom 100 International Europe Ltd services in telecommunications to related companies. # Singapore Telecom Provision of managed facsimile Australia 100 Australia Pty Limited services. SingTel ADSB Investment holding company. Netherlands 90 (Netherlands) B.V. ## SingTel (Cambodia) Under voluntary liquidation. Cambodia 100 Private Limited SingTel Mobile Sales Sale of telecommunications Singapore 100 Pte Ltd equipment and provision of related services. # SingTel Services Australia Provision of customer services Australia 100 Pty Limited for telecommunications related activities. SingTel Strategic Investment holding company. Singapore 100 Investments Pte Ltd SingTel USA, Inc. Investment holding company. USA 100
100 100
100 100
82.9 100 100 100 100 100 100 100 ^^^ 100 100 100
210
A U D I T E D F I N A N C I A L S TAT E M E N T S
COUNTRY OF INCORPORATION AND PLACE OF BUSINESS PERCENTAGE OF EFFECTIVE EQUITY HELD BY THE GROUP % 2001 2000 1999
NAME OF COMPANIES
PRINCIPAL ACTIVITIES
Subsidiary Companies Held by Subsidiary Companies ST Paging Pte Ltd STI (Australia) Holding Pte Ltd +# Suzhou ZhongXing Telecommunication Engineering Development Co. Ltd TE International (S) Pte Ltd Thai Page Pte Ltd Tourism Publications Corporation Sdn Bhd ## Viva Bahagia Sdn Bhd # ZapSurf Private Limited Zeus Digital Asset Services Pte Ltd
Sale of telecommunications equipment and provision of related services. Investment holding company. Under voluntary liquidation.
100 100 70
100 100 70
100 100 70
Engaged in the business of investment holding, sales and maintenance of telecommunications equipment. Investment holding company. Provision of directory advertising and publishing. To acquire property for investment and to carry out general trading. Provision of value-added services and internet-related services. To provide digital asset services to content owners and to be a wholesale distributor of protected music content.
100
100
100
Notes: * Denotes amounts of less than S$50,000. ** Excluding the Special Share issued to the Minister for Finance (Incorporated) in pursuant to section 47 of the TAS Act 1992 and Article 6 of the Articles of Association. + Subsidiary companys financial year is 31 December. ++ Includes 97.77% deemed interest held by a wholly owned subsidiary. ^ During the financial year ended 31 March 2001, the Group increased its interest in First Cube Pte Ltd from 50% to 72.92%. Accordingly, it is reclassified from a joint venture to a subsidiary company as at 31 March 2001. ^^ Pursuant to a merger with Asia2B.com Holdings Limited during the financial year ended 31 March 2001, the Group exchanged its 89% equity interest in SESAMi.com Pte Ltd group for an equity interest of 44.5% in SESAMi Inc., a joint venture company. ^^^ During the financial year ended 31 March 2000, interest was diluted to 50% and reclassified from a subsidiary to a joint venture company accordingly. @ Shareholding was transferred from a subsidiary company to the Company during the year ended 31 March 2001. All companies are audited by PricewaterhouseCoopers, Singapore except for the following: # Audited by associate firms of PricewaterhouseCoopers, Singapore. ## Audited by other firms.
211
A U D I T E D F I N A N C I A L S TAT E M E N T S
COUNTRY OF INCORPORATION AND PLACE OF BUSINESS PERCENTAGE OF EFFECTIVE EQUITY HELD BY THE GROUP % 2001 2000 1999 2001 COST OF INVESTMENT S$ MILLION 2000 1999
NAME OF COMPANIES
PRINCIPAL ACTIVITIES
Joint Venture Companies Held by the Company # Acasia Communications Provision of Sdn Bhd services relating to telecommunications, computer, data and information within and outside Malaysia. ACPL Marine Pte Ltd Owning, operating and managing of maintenancecum-laying cableships. ASEAN Cableship An operator of a cable Pte Ltd repair vessel for repair and maintenance of submarine telecommunication cables. # ASEAN Telecom Investment holding Holding Sdn Bhd company. ## Digital Network Access Provision of analogue Communications Pte Ltd and digital public trunk radio services. Failsafe Corporation Provision of IT (Singapore) Pte Ltd outsourcing and hosting services. Indian Ocean Cableship Ownership and Pte Ltd chartering of ships, barges and remotely operated vehicles for repair, maintenance and protection of submarine cable and plant. International Cableship Ownership and Pte Ltd chartering of cableships. Lycos Asia Limited To provide local portal (formerly known as sites in its target markets Lycos Asia Pte Ltd) with services such as World Wide Web navigation, search and community features. # Network i2i Limited Operation and provision of telecommunications facilities and services utilising a network of submarine cable systems and associated terrestrial capacity. ## Radiance The sale, distribution, Communications Pte Ltd installation and maintenance of telecommunications equipment in Singapore. TeleTech Park Pte Ltd Engaged in the business of development, construction, operation and management of TeleTech Park. @ Virgin Mobile Holdings Investment holding Pte Ltd company.
Malaysia
18.8
18.8
18.8
0.5
0.5
0.5
Singapore Singapore
41.7 16.7
16.7
16.7
0.1 0.1
0.1
0.1
17.6 50 50 50
17.6 50 50
17.6
0.1
Singapore Singapore
45 50
45 50
45
0.4 54.1
0.4 8.4
0.4
Mauritius
50
Singapore
50
50
13.3
13.3
Singapore
40
40
40
10.0
10.0
10.0
Singapore
50.6
9.1
212
A U D I T E D F I N A N C I A L S TAT E M E N T S
COUNTRY OF INCORPORATION AND PLACE OF BUSINESS PERCENTAGE OF EFFECTIVE EQUITY HELD BY THE GROUP % 2001 2000 1999 2001 COST OF INVESTMENT S$ MILLION 2000 1999
NAME OF COMPANIES
PRINCIPAL ACTIVITIES
Joint Venture Companies Held by Subsidiary Companies ## APT Satellite Telecommunications Limited ## Beijing Asia Pacific First Star Communications Technology Co. Ltd Distribution Centre (Asia) Pte Ltd ^ First Cube Pte Ltd
Provision of Hong Kong telecommunications services. To construct a Peoples Republic nation-wide radio of China paging network. International mail Singapore distribution. Provider of internetSingapore enabled storage units. # Forward Media Sdn Bhd To publish Borneo Brunei Bulletin Brunei Yearbook and other publications. ## ID.Safe Pte Ltd To provide certifying, Singapore authenticating, verifying of electronic transactions and other corporate security related transactions. InfoGrid Pte Ltd Under voluntary Singapore liquidation. # Integrated Databases Provision of directory India India Ltd advertising and publishing. Mail Boxes Exchange Provision of document Singapore (MBE) Pte Ltd exchange, business and communication services. # PT Bukaka SingTel Operation of fixed public Indonesia International switch telephone network services in eastern Indonesia. ## PT SkyTelindo Services Provision of paging Indonesia services. Print and Mail Printing and distribution Singapore Intercontinental of international mail. (Asia) Pte Ltd ^^ SESAMi Inc. Engaged in investment Cayman Islands holding, provision of b2b e-commerce services, e-commerce software solutions and related services. # Shin Digital Investment holding Thailand Company Limited company. Virgin Mobile Provision of Singapore (Asia) Pte Ltd telecommunications services and products. # Virgin Mobile Provision of Hong Kong (Hong Kong) Limited telecommunication services and products. Virgin Mobile Provision of Singapore (Singapore) Pte Ltd telecommunications services and products. # WorldPartners Company To create and support USA commonly branded telecommunications services under the brand name of Worldsource. Joint Venture Companies held by the Group at cost
45.0 35 40 ^ 50 50
35 40 50 50 50
35 40 50
50 49 50 40 30 50 44.5
50 49 50 40 30 50 ^^
50 49 50 40 30
20
20
82.9 * * * 9.2
12.8
16.2
339.1
127.7
101.8
Notes: * Denotes amounts of less than S$50,000. ^ During the financial year ended 31 March 2001, the Group increased its interest in First Cube Pte Ltd from 50% to 72.92%. Accordingly, it is reclassified from a joint venture to a subsidiary company as at 31 March 2001. ^^ Pursuant to a merger with Asia2B.com Holdings Limited during the financial year ended 31 March 2001, the Group exchanged its 89% equity interest in SESAMi.com Pte Ltd group for an equity interest of 44.5% in SESAMi Inc., a joint venture company. @ The Group regards Virgin Mobile Holdings Pte Ltd as a joint venture, notwithstanding that it holds 50.6% of the companys issued share capital, because it exercises joint control. All companies are audited by PricewaterhouseCoopers, Singapore except for the following: # Audited by associate firms of PricewaterhouseCoopers, Singapore. ## Audited by other firms.
213
A U D I T E D F I N A N C I A L S TAT E M E N T S
COUNTRY OF INCORPORATION AND PLACE OF BUSINESS PERCENTAGE OF EFFECTIVE EQUITY HELD BY THE GROUP % 2001 2000 1999 2001 COST OF INVESTMENT S$ MILLION 2000 1999
NAME OF COMPANIES
PRINCIPAL ACTIVITIES
Associated Companies Held by the Company ## Abacus Travel Systems Pte Ltd
## ##
##
## #
# ## ##
## # # ## **
## ## ## #
##
Marketing and Singapore distributing certain travel-related services through on-line airline computerised reservations systems. 1-Net Singapore Pte Ltd Provision of broadband Singapore multimedia services in Singapore. Point Asia Dot Com Thai internet and Thailand (Thailand) Limited e-commerce service provider. Associated Companies Held by Subsidiary Companies AAPT Limited Provision of switched Australia and lease line value added communications services. Advanced Data Network Provision of data Thailand Communications Co., Ltd communication services. Advanced Info Service Provision of cellular Thailand Public Co., Ltd and paging telecommunications services. ADSB Investment holding Netherlands Telecommunications B.V. company. APT Satellite Investment holding Bermuda Holdings Ltd company. APT Satellite To establish, conduct British International Company and carry on satellite Virgin Islands Limited communications, telecommunications and related services including management and operation. Bharti Telecom Ltd Provision of cellular, fixed India line telecommunications and internet services. Bharti Televentures Ltd Provision of cellular fixed India line telecommunications services. Data Network Solutions Provision of information Thailand Company Limited services and related networking equipment. Globe Telecom, Inc. Provision of cellular Philippines mobile telephone, international and fixed line telecommunications services. Globe Telecom To trade, issue and hold Philippines Holding, Inc. financial securities. InfoLink Co., Ltd Provision of value Thailand added paging services. InfoServe Technology Provision of Cayman Islands Corp. (Cayman Islands) communications, internet, VPN and solution services. Integrated Marketing and servicing Brunei Communications of telecommunications Sdn Bhd and information technology equipment. Multi-media Sales and maintenance Malaysia Communications of telecommunications Sdn Bhd equipment.
30
30
30
0.9
0.9
0.9
31.1
30
30
38.7
0.5
0.5
17.6
55.6
21
20
40 13
608.5
572.6
23.5 534.6
24.3
24.3
930.5
930.5
20 28.5 23.6
39
49 39
304.6
* 264.1
40.7 49 30.5
49
49 25
* * 78.9
* 0.3
49
49
49
0.5
0.5
0.5
214
A U D I T E D F I N A N C I A L S TAT E M E N T S
COUNTRY OF INCORPORATION AND PLACE OF BUSINESS PERCENTAGE OF EFFECTIVE EQUITY HELD BY THE GROUP % 2001 2000 1999 2001 COST OF INVESTMENT S$ MILLION 2000 1999
NAME OF COMPANIES
PRINCIPAL ACTIVITIES
Associated Companies Held by Subsidiary Companies ## New Century Infocomm Tech Co. Ltd (formerly known as New Century Infocomm Co. Ltd) ## Pager Sales Co Ltd # #
Taiwan
24.3
29
635.4
629.4
Engaged in marketing of pagers. Teleinfo Media Co., Ltd Publishing and distribution of telephone directory. VA Dynamics Sdn Bhd Distribution of telecommunication and related products. Associated companies held by the Group at cost
NAME OF COMPANIES
40 25 49
40 49
40 49
* 19.7 0.5
* 0.4
* 0.4
PRINCIPAL ACTIVITIES
Associated Companies Held by Associated Companies ## Belgacom S.A. Provision of cellular mobile telephone, international and fixed line telecommunications services.
Belgium
12.15
12.15
12.15
Notes: * Denotes amounts of less than S$50,000. ** During the financial year ended 31 March 2001, Globe Telecom (Globe) acquired 100% of Islacom Communications Inc (Islacom) via share swap. The dilution of interest in Globe during FY2001 is mainly attributed to this. In addition, the effective equity held by the Group is inclusive of new shares to be issued to SingTel via the conversion of the promissory notes and warrants. All companies are audited by PricewaterhouseCoopers, Singapore except for the following: # Audited by associate firms of PricewaterhouseCoopers, Singapore. ## Audited by other firms.
215
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
3,479.7 1,437.5
1,213.5 365.0
685.6 772.8
Outstanding commitments relate mainly to the purchase of telecommunications and postal fixed assets and investments, and construction of cable networks.
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
(b) The outstanding forward foreign currency contracts are as follows: For hedging purposes As part of trading portfolio
(c) Proposed acquisition of Cable & Wireless Optus Limited On 26 March 2001, the Company (SingTel) announced the proposed acquisition of all the outstanding shares in Cable & Wireless Optus Limited (Optus). As at 10 May 2001, there were 3,786.8 million issued Optus Shares, 9.7 million outstanding Optus Options and 7.2 million additional Optus Shares that may be issued during the offer period pursuant to Optus employee share schemes. The acquisition will be made through a wholly owned subsidiary, SingTel Australia Investment Ltd (SingTel Australia), a subsidiary incorporated in the British Virgin Islands on 1 May 2001. SingTel Australia will fund the cash component of the Offer using cash provided by SingTel. Optus shareholders are offered three alternatives for each Optus share: (i) 1.66 new SingTel shares (ii) A$2.25 in cash plus 0.8 new SingTel shares (iii) A$2.00 in cash plus A$0.45 in SingTel US$ denominated bonds (based on a fixed exchange rate of US$0.4940/A$1) plus one Unsecured Note. The Unsecured Note may be redeemed for 0.54 new SingTel shares, with the possibility of additional cash and bonds in lieu of shares, depending on the offer consideration alternatives chosen by all accepting Optus shareholders. SingTel intends to fund the cash portion of the offer consideration through a combination of internal cash resources and new debt facilities. A total cash and bond amount of A$9.25 billion, of which the face value of the bond amount will not exceed A$2.0 billion, has been made available under the offer. Depending on the level of acceptance and the offer consideration alternative chosen by the accepting Optus shareholders, the number of new SingTel shares to be issued as purchase consideration may range from nil to 2.98 billion shares (16.2% of the enlarged post-acquisition share capital). The shares to be issued under the offer will rank equally in all respects with the existing SingTel shares on the date of their issue. The offer is conditional upon, among other things, acceptances being received in respect of more than 50% of outstanding Optus shareholders, SingTel shareholder approval and relevant regulatory approvals. Temasek Holdings (Private) Limited, SingTels largest shareholder, which owns approximately 78% of SingTel as at 31 March 2001, has agreed to vote in favour of the shareholder resolutions required to be passed in connection with this acquisition. In addition, SingTel has entered into a Pre-Bid Agreement with Cable & Wireless plc (C&W plc) under which, among other things, C&W plc has agreed to accept the SingTels offer in respect of 19.8% of Optus share capital. The final purchase consideration cannot presently be determined as it is dependent on the level of acceptances received at the conclusion of the offer, the offer consideration alternatives chosen by the accepting Optus shareholders, the SingTel share price and the US$/S$ and A$/S$ exchange rates prevailing at the date of the acquisition.
216
A U D I T E D F I N A N C I A L S TAT E M E N T S
2001 S$ MILLION 2000 S$ MILLION 1999 S$ MILLION
34 SEGMENT INFORMATION
With effect from the financial year beginning 1 April 2000, the Group adopted the revised Statement Of Accounting Standard 23 (1999), Segment Reporting, which came into effect for accounting periods beginning on that date. SAS 23 (revised) requires that information be reported for business segments and geographical segments. It provides more detailed guidance than the original SAS 23 for identifying business segments and geographical segments. It requires that an enterprise look to its internal organisational structure and internal reporting system for the purpose of identifying those segments. As a result, reporting for the business and geographical segments have been redefined to conform with the new requirements. Data for the financial year ended 31 March 1999 had not been collected in a way that allows reclassification and it is not practicable to present the information in this format for the business and geographical segments. Accordingly the segment report for the year ended 31 March 1999 has not been presented. Primary Reporting Format Business Segments Under the revised SAS 23, the Group is organised into the following business segments: Wireline represents fixed network telecommunications services such as domestic and IDD services, leased lines, data communications, cable networks and internet services. Wireless represents mobile telecommunications services such as cellular, paging and Inmarsat services. It also includes satellite telecommunications services such as lease of transponders. Postal represents postal services. Information technology and engineering represents information technology consultancy, systems integration and engineering services. Others represents the balance of the Groups operations and comprise sale of telecommunications equipment, directory advertising and publishing, storage of cables and investment activities. The accounting policies used to derive reportable segment results are consistent with those described under the Significant Accounting Policies note to the financial statements. Inter-segment pricing is determined on an arms length basis. Segment results represent operating revenue less expenses. The asset totals disclosed for each segment represent assets directly managed by each segment, and primarily include receivables, property, plant and equipment, inventories, operating cash and bank balances. Corporate-held assets managed at the corporate level not allocated to the segments include fixed deposits and investments. Segment liabilities comprise operating liabilities and exclude borrowings, provisions for taxes, deferred taxation and dividends. Segment capital expenditure comprises additions to property, plant and equipment.
217
A U D I T E D F I N A N C I A L S TAT E M E N T S
Primary Reporting Format Business Segments (Continued) Total revenue from external customers Inter-segment revenue Total revenue 2,887.6 167.1 3,054.7 938.8 174.8 1,113.6 362.8 (0.6) 341.0 29.2 370.2 126.5 23.8 472.8 124.1 596.9 40.2 8.0 285.3 63.8 349.1 24.2 (5.6) (559.0) (559.0) 75.7 (71.0) 4,925.5 4,925.5 1,888.6 93.2 337.0
Segment results 1,259.2 Other income 138.6 Compensation from IDA 337.0 Share of profits and losses of joint venture and associated companies 123.5 1,858.3 Interest and investment income Interest on borrowings Profit before tax Tax Profit after tax Minority interests Profit before extraordinary items Extraordinary items Profit attributable to shareholders Segment assets Investment in net assets of joint venture and associated companies Unallocated assets Consolidated total assets Segment liabilities 3,874.4 Unallocated liabilities Consolidated total liabilities Capital expenditure Depreciation 1,527.6 391.7 4,832.6
228.3 590.5
0.3 150.6
48.2
(3.2) 15.4
4.7
348.9 2,667.7 393.6 (9.1) 3,052.2 (715.1) 2,337.1 (12.9) 2,324.2 (317.9) 2,006.3
770.3
729.0
299.3
220.3
6,851.5
1,174.0 6,006.6
505.0 1,275.3
1.0 730.0
299.3
188.2 408.5
370.9
119.3
156.7
99.4
110.8 164.3
20.3 42.3
66.6 13.9
7.5 11.9
218
A U D I T E D F I N A N C I A L S TAT E M E N T S
Primary Reporting Format Business Segments (Continued) Total revenue from external customers Inter-segment revenue Total revenue 2,992.9 94.2 3,087.1 910.5 197.0 1,107.5 133.1 8.4 141.5 283.0 322.6 26.9 349.5 128.0 10.8 0.3 139.1 379.7 105.5 485.2 49.6 12.6 62.2 260.1 48.1 308.2 25.6 (2.5) 15.8 38.9 (471.7) (471.7) 74.2 (69.8) 4.4 4,865.8 4,865.8 1,852.7 35.2 367.5 2,255.4 273.5 (8.1) 2,520.8 (661.5) 1,859.3 (20.4) 1,838.9 701.0 2,539.9 855.9 230.6 1,086.5 724.3 0.8 725.1 212.7 3.5 216.2 251.8 66.6 318.4 5,516.4 1,350.2 6,866.6 7,050.2 13,916.8 3,175.3 2,136.7 5,312.0 714.4 782.8
Segment results 1,442.2 Other income 75.7 Share of profits and losses of joint venture and associated companies 209.9 1,727.8 Interest and investment income Interest on borrowings Profit before tax Tax Profit after tax Minority interests Profit before extraordinary items Extraordinary items Profit attributable to shareholders Segment assets Investment in net assets of joint venture and associated companies Unallocated assets Consolidated total assets Segment liabilities 2,406.1 Unallocated liabilities Consolidated total liabilities Capital expenditure Depreciation 477.8 412.7 3,471.7 1,048.7 4,520.4
300.8
120.1
159.2
189.1
142.0 303.7
60.2 40.5
22.0 16.2
12.4 9.7
Secondary Reporting Format Geographical Segments The Groups business segments operate mainly in Singapore, the home country of the Company, which is also an operating company. No other individual country contributed more than 10% of consolidated revenue and assets. In presenting information on the basis of geographical segments, segment revenue is based on where the service is rendered and where the customer is located. Total assets and capital expenditure are shown by geographical areas in which the assets are located.
219
A U D I T E D F I N A N C I A L S TAT E M E N T S
Revenue from external customers Segment results Other income Compensation from IDA Share of results of joint venture and associated companies Interest and investment income Interest on borrowings Profit before tax Segment assets Investment in net assets of joint venture and associated companies Unallocated assets Total assets Capital expenditure
YEAR ENDED 31 MARCH 2000
4,925.5 1,888.6 93.2 337.0 348.9 2,667.7 393.6 (9.1) 3,052.2 6,851.5 1,868.2 8,719.7 7,432.9 16,152.6 1,732.8
T O TA L S$ MILLION
751.0
SINGAPORE S$ MILLION
981.8
OTHERS S$ MILLION
Revenue from external customers Segment results Other income Share of results of joint venture and associated companies Interest and investment income Interest on borrowings Profit before tax Segment assets Investment in net assets of joint venture and associated companies Unallocated assets Total assets Capital expenditure
4,865.8 1,852.7 35.2 367.5 2,255.4 273.5 (8.1) 2,520.8 5,516.4 1,350.2 6,866.6 7,050.2 13,916.8 714.4
692.4
22.0
35 CONTINGENT LIABILITIES
As at 31 March 2001, the Company provided a guarantee to a third party for due performance by its subsidiary of its obligations and liabilities under a contract to provide information technology services in the ordinary course of business. In addition, a subsidiary company provided performance guarantees amounting to S$115.2 million (2000: S$110.0 million, 1999: S$110.9 million) to a third party in respect of a joint venture company.
36 SUBSEQUENT EVENTS
On 23 April 2001, a subsidiary company was granted a facilities-based operator licence for the provision of third generation (3G) mobile communications systems and services and the 3G spectrum right by the IDA at the price of S$100 million.
220
A U D I T E D F I N A N C I A L S TAT E M E N T S
37 ACCOUNTING POLICIES
The Group will be adopting the new or revised Statements of Accounting Standard (SAS) that become applicable and effective in Singapore from the following relevant dates: For the financial year ending 31 March 2002 SAS SAS SAS SAS SAS SAS SAS SAS SAS SAS 8 : 10: 12: 17: 22: 31: 32: 34: 35: 36: Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies Events after Balance Sheet Date Income Taxes Employee Benefits Business Combinations Provisions, Contingent Liabilities and Contingent Assets Financial Instruments: Disclosure and Presentation Intangible Assets Discontinuing Operations, and Impairment of Assets
For the financial year ending 31 March 2003 SAS 33: Financial Instruments: Recognition and Measurement
221
222
ANNEXURE 2
IMPLEMENTATION AGREEMENT
223
I M P L E M E N TAT I O N A G R E E M E N T
IMPLEMENTATION AGREEMENT EXTRACTS PARTIES SINGAPORE TELECOMMUNICATIONS LIMITED of 31 Exeter Road, Comcentre, Singapore, 239732 (SingTel), and CABLE & WIRELESS OPTUS LIMITED ACN 052 833 208 of 101 Miller Street, North Sydney NSW 2060 (Optus) RECITALS A. Cable and Wireless plc together with Optus invited SingTel and a number of other parties to make proposals to acquire all or part of Optus or its principal operating businesses. SingTel has proposed the Transaction described in this Agreement. The structure of the Transaction has been formulated by SingTel to meet its commercial objectives. B. SingTel and Optus have agreed on the terms of this agreement to implement the Transaction under which Optus Shareholders will be invited by Bidder to dispose of their Optus Shares and Bidder will acquire Optus Shares. OPERATIVE PROVISIONS
1. INTERPRETATION
1.1 Definitions The definitions below relate to the terms used in the Unsecured Note Provisions and the Buy-Back Provisions which are not defined in Section 12 of this Bidders Statement in the same or substantially similar terms. The following definitions apply in this agreement, unless the context otherwise requires. Additional Allocated Bond Amount is defined in clause 3.4. Additional Allocated Cash is defined in clause 3.4. Additional Cash is defined in clause 3.4. Bank Account means an A$ bank account to be established at the Nominated Bank in the name of Bidder as agent for the Optus Shareholders in connection with the Buy-Back. Bidder means [SingTel Australia]. Bonds are described in clause 3.3. Business Day means a weekday on which trading banks are open for general banking business in Sydney and Singapore. Cheque means a cheque drawn on Optus Account. Final Maturity Date is defined in clause 3.6. Formula Rate of a Bond is the interest rate (expressed as a percent per annum) determined in accordance with Schedule 7. Initial Redemption Amount means A$1.48. Insolvency Event means in respect of a corporation: (a) an order is made, or the corporation passes a resolution, for its winding up; (b) an administrator is appointed to the corporation; or (c) the corporation is unable to pay its debts. Interim Maturity Date is defined in clause 3.6. Late Maturity Date is defined in clause 3.5B. Lender means: (a) if SingTel has not nominated a subsidiary as Lender in accordance with clause 3.17, SingTel; or
224
I M P L E M E N TAT I O N A G R E E M E N T
(b) otherwise, a nominated subsidiary of SingTel (which nominated subsidiary may not also be the Bidder). Maximum Bond Amount means the sum of the Bond Issue Prices (expressed in A$ by reference to the Announcement Exchange Rate) of Tranche A Bonds and Tranche B Bonds where: (a) the aggregate Bond Issue Price of all Tranche A Bonds equals the aggregate Bond Issue Price of all Tranche B Bonds; and (b) the sum of the face values of both tranches of Bonds (expressed in A$ by reference to the Announcement Exchange Rate) is A$2 billion. Nominated Bank means an Australian bank and branch (in Australia) nominated by SingTel and approved by Optus (such approval not to be unreasonably withheld). There may be more than one Nominated Bank. Optus Account means an A$ account of Optus, in the name of Optus, to be styled Buy-Back Account with the Nominated Bank to be opened by Lender as agent for Optus and the authorised signatories on which from time to time are representatives of SingTel who have been approved by Optus (such approval not to be unreasonably withheld). Remaining Share means each Optus Share not accepted into the Offer by the end of the Offer Period. Takeover Bid means an off-market takeover bid for all of the Optus Shares to be implemented in compliance with Chapter 6 of the Corporations Law (which at the election of Bidder may extend to Optus Shares that come to be in the bid class during the Offer Period because of the conversion of Optus Options). Total Cash Pool is defined in clause 3.4. Tranche A Bond means a Bond belonging to Tranche A referred to in Schedule 7. Tranche B Bond means a Bond belonging to Tranche B referred to in Schedule 7. Transaction means the implementation of the Takeover Bid, the Buy-Back and the Placement on the terms of this agreement. 1.2 Rules for interpreting this agreement Headings are for convenience only, and do not affect interpretation. The following rules also apply in interpreting this agreement, except where the context makes it clear that a rule is not intended to apply. (a) A reference to: (i) legislation (including subordinate legislation) is to that legislation as amended, re-enacted or replaced, and includes any subordinate legislation issued under it; (ii) a document or agreement, or a provision of a document or agreement, is to that document, agreement or provision as amended, supplemented, replaced or novated; (iii) a party to this agreement or to any other document or agreement includes a permitted substitute or a permitted assign of that party; (iv) a person includes any type of entity or body of persons, whether or not it is incorporated or has a separate legal identity, and any executor, administrator or successor in law of the person; and (v) anything (including a right, obligation or concept) includes each part of it. (b) A singular word includes the plural, and vice versa. (c) A word which suggests one gender includes the other genders. (d) If a word is defined, another part of speech has a corresponding meaning. (e) If a party to this document is made up of more than one person, or a term is used in this document to refer to more than one party: (i) an obligation of those persons is joint and several;
225
I M P L E M E N TAT I O N A G R E E M E N T
(ii) a right of those persons is held by each of them severally; and (iii) any other reference to that party or term is a reference to each of those persons separately, so that (for example) a representation, warranty or undertaking is given by each of them separately. (f) The Schedules form part of this agreement. (g) If there is more than one Nominated Bank, the provisions of this agreement relating to accounts at the Nominated Bank apply to all the Nominated Banks. 1.3 Business Days If the day on or by which a person must do something under this agreement is not a Business Day: (a) if the act involves a payment that is due on demand, the person must do it on or by the next Business Day; and (b) in any other case, the person must do it on or by the previous Business Day.
226
I M P L E M E N TAT I O N A G R E E M E N T
(d) (i) All Bonds of a Tranche will be issued at the Bond Issue Price, and accrue interest at the same rate, as the Bonds of that Tranche which are issued on the First Settlement Date. (ii) Any Bond issued after the First Settlement Date will accrue interest from (and including) the First Settlement Date. (iii) Accrued interest will be disregarded in satisfying the Bond component of the Offer Consideration due to any Optus Shareholder. 3.4 Additional Cash for Unsecured Notes The maximum amount of cash and Bonds available to all Optus Shareholders is A$9.25 billion, of which the maximum face value of Bonds which are available to all Optus Shareholders (expressed in A$ by reference to the Announcement Exchange Rate) is A$2 billion. A potentially lesser amount equal to the sum of A$7.25 billion and the Maximum Bond Amount (Total Cash Pool) is used for the purposes of calculation to reflect the fact that the Bonds will be issued at the Bond Issue Prices and not face value. At the Final Maturity Date, Bidder will calculate: (a) the total amount of cash paid or payable to all Optus Shareholders under clause 3.2 (excluding the Redemption Amount of the Unsecured Notes), including the amount of any Withholding Tax paid or payable to the Australian Tax Office on behalf of Optus Shareholders under clause 4.5(b)(i); and (b) the aggregate Bond Issue Prices of all Bonds issued or to be issued to all Optus Shareholders under clause 3.2, excluding in both cases, any cash or Bonds which may be paid or issued under clause 3.5, 3.5A or 3.5B. If the aggregate of (a) and (b) is less than the Total Cash Pool, the difference (the Additional Cash) will be allocated in respect of each Unsecured Note as the lesser of: (c) the Initial Redemption Amount; and (d) the Additional Cash divided by the total number of issued Unsecured Notes, (the Additional Allocated Cash). Of such Additional Allocated Cash, each Unsecured Note is allocated an additional amount of Bonds (Additional Allocated Bond Amount), which shall be calculated as the lesser of: (e) the Additional Allocated Cash; and (f) the difference of the Maximum Bond Amount and the amount in paragraph (b) of this clause, if any, divided by the total number of issued Unsecured Notes. 3.5 Redemption of Unsecured Notes on Final Maturity Date SingTel must, on the Final Maturity Date, redeem each Unsecured Note by paying to Bidder as agent for each holder of an Unsecured Note, for each Unsecured Note, the Redemption Amount in cash, which must be used as follows: (a) the difference between: (i) the Redemption Amount; and (ii) the Additional Allocated Cash, must be used, in aggregate, to subscribe for SingTel Shares at an issue price of A$2.74 provided, however, that where the aggregate amount that would otherwise be received by a holder is not a whole multiple of A$2.74, the number of SingTel Shares issued to that holder will be rounded up to the nearest whole number of SingTel Shares (at no additional cost to the holder); (b) the Additional Allocated Bond Amount must be used, in aggregate, to subscribe for Bonds at the Bond Issue Price provided that if the face value of the Bonds so subscribed is not a whole number then rounded down to the nearest US$1 amount; and (c) the difference between the Additional Allocated Cash (in aggregate) and the Additional Allocated Bond Amount (in aggregate) can be either retained in A$ or exchanged for US$ at the Announcement Exchange Rate (at the option of the holder of the Unsecured Note) rounded down to the nearest smallest unit of the relevant currency.
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I M P L E M E N TAT I O N A G R E E M E N T
3.5A Partial Redemption of Unsecured Notes on Interim Maturity Date If, at the end of the Offer Period, Bidder is entitled to proceed with Compulsory Acquisition, the Unsecured Notes will be partially redeemed as follows: (a) on the Interim Maturity Date, SingTel must pay to Bidder as agent for each holder of Unsecured Notes, for each Unsecured Note, an amount in cash which is the difference between: (i) the Initial Redemption Amount; and (ii) an amount which is calculated as the Additional Allocated Cash under clause 3.4, on the assumptions that: (A) the Final Maturity Date is assumed for this purpose to be the date on which the Offer Period ends; and (B) the Offer is accepted and the Offer Consideration described in clause 3.2(a)(i) is elected in respect of each Remaining Share, provided, however, that where the aggregate amount that would otherwise be received by a holder is not a whole multiple of A$2.74, the amount paid per Unsecured Note held by that holder will be reduced so that the aggregate amount received will be the nearest whole multiple of A$2.74; and (b) the holder of each Unsecured Note must use the Partial Redemption Amount, in aggregate, to subscribe for SingTel Shares at an issue price of A$2.74. 3.5B Redemption of Certain Unsecured Notes after Final Maturity Date If any Unsecured Notes are issued after the Final Maturity Date, SingTel must, on the day of issue (Late Maturity Date), immediately redeem each such Unsecured Note by paying, to Bidder as agent for each such holder of Unsecured Notes, for each Unsecured Note, the Redemption Amount in cash which must be used as follows: (a) the difference between: (i) the Redemption Amount; and (ii) the Additional Allocated Cash which was calculated on the Final Maturity Date, must be used, in aggregate, to subscribe for SingTel Shares at an issue price of A$2.74 provided, however, that where the aggregate amount that would otherwise be received by a holder is not a whole multiple of A$2.74, the number of SingTel Shares issued to that holder will be rounded up to the nearest whole number of SingTel Shares (at no additional cost to the holder); (b) the Additional Allocated Bond Amount which was calculated on the Final Maturity Date must be used, in aggregate, to subscribe for Bonds at the Bond Issue Price provided that if the face value of the Bonds so subscribed is not a whole number then rounded down to the nearest US$1 amount; and (c) the difference between the Additional Allocated Cash (in aggregate) which was calculated on the Final Maturity Date and the Additional Allocated Bond Amount (in aggregate) which was calculated on the Final Maturity Date can be either retained in A$ or exchanged for US$ at the Announcement Exchange Rate (at the option of the holder of the Unsecured Note) rounded down to the nearest smallest unit of the relevant currency. 3.6 Other terms of Unsecured Note (a) Each Unsecured Note initially has a face value equal to the Initial Redemption Amount. (b) The Final Maturity Date of the Unsecured Notes is the date which is 7 days after the end of the Offer Period unless paragraph (c) provides otherwise. (c) If, at the end of the Offer Period, Bidder is entitled to proceed with Compulsory Acquisition: (i) the Interim Maturity Date is the date which is 7 days after the end of the Offer Period; and
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(ii) the Final Maturity Date is the date which is 7 days after the date on which the form of consideration payable in respect of each Remaining Share is ascertained under section 661C of the Corporations Law (other than those, if any, which are the subject of an objection under section 661E). (d) By accepting the Offer and subscribing for an Unsecured Note, the holder has agreed to appoint the Bidder as their agent as described in clauses 3.5, 3.5A, 3.5B and this clause and has agreed to apply the Redemption Amount on the Final Maturity Date (or the Late Maturity Date, as the case may be), and any Partial Redemption Amount on the Interim Maturity Date, in accordance with clauses 3.5, 3.5A and 3.5B. SingTel will hold the certificate for the Unsecured Note on behalf of the Optus Shareholder until the Final Maturity Date (or the Late Maturity Date, as the case may be), and will pay or provide as directed by the Bidder as agent for the holder the Redemption Amount and any Partial Redemption Amount and the Bidder will apply the Redemption Amount and any Partial Redemption Amount on behalf of the holder in accordance with clauses 3.5, 3.5A and 3.5B. (e) SingTel may require a lien or other security over the Unsecured Note and the Redemption Amount or any Partial Redemption Amount, to secure the performance by the holder of its obligation under paragraph (d). (f) No interest is payable on an Unsecured Note. (g) The Unsecured Notes are non-transferable and will not be listed. [Clauses 3.7 to 3.18 are Not Extracted]
4. PROVISION OF CONSIDERATION
4.1 Pre-conditions to Offer Funding The operation of this clause 4 in relation to SingTel, Bidder, Lender and Optus is subject to all of the defeating conditions of the Offer being fulfilled or, subject to clause 3.10(c), the Offer being declared by Bidder to be free of all such conditions which have not been fulfilled and no Insolvency Event occurring in relation to Optus. 4.2 Settlement Dates SingTel and Bidder must ensure that each Optus Shareholder who accepts the Offer, whether the Optus Shareholder chooses the Transfer Alternative or the Buy-Back Alternative, will receive the Offer Consideration due to be paid to that shareholder (in the latter case, net of Withholding Tax pursuant to the mechanism described in clause 4.5), as follows: (a) for each Optus Shareholder who accepts the Offer prior to the Unconditional Date, on the day which is 7 days after the Unconditional Date (the First Settlement Date); (b) for each Optus Shareholder who accepts the Offer after the Unconditional Date, on a date nominated by Bidder to Optus (Second Settlement Date) which is no later than the earlier of: (i) one month after the later of acceptance of the Offer by the Optus Shareholder and the Unconditional Date; and (ii) 21 days after the end of the Offer Period. Bidder may nominate more than one Second Settlement Date under this clause 4.2(b). The Settlement Date for a particular acceptance by an Optus Shareholder must not occur until at least 5 Business Days after the date of acceptance by that shareholder. 4.3 The Buy-Back Alternative (a) Bidder, as agent for each Optus Shareholder, must prepare a Buy-Back Agreement for each Optus Shareholder who elects the Buy-Back Alternative in respect of each Settlement Date on which Optus is required to accept Buy-Back Offers, completing all relevant details of those agreements in accordance with this agreement and in a form suitable for execution by Optus.
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(b) In relation to each Optus Shareholder who accepts the Offer and elects the Buy-Back Alternative, and who therefore makes a Buy-Back Offer, Optus must, on the first applicable Settlement Date following the later of the day on which an Optus Shareholder makes a Buy-Back Offer and the Unconditional Date: (i) enter into a Buy-Back Agreement with that Optus Shareholder in respect of all Optus Shares in respect of which the Buy-Back Alternative has been chosen by the Optus Shareholder (and, as contemplated by clause 3.8, Bidder will act as agent for the Optus Shareholder) by executing the draft agreements referred to in paragraph (a); and (ii) pay the Buy-Back Consideration payable to each Optus Shareholder who enters into a Buy-Back Agreement in accordance with clause 4.5; and (iii) accept a transfer of the relevant Optus Shares. (c) Optus must use all reasonable endeavours to register the transfer of the relevant Optus Shares to Optus on the relevant Settlement Date or, if that is not reasonably practicable, as soon as reasonably possible after the relevant Settlement Date. In accordance with section 257H(3) of the Corporations Law, the Optus Shares are cancelled immediately after registration of the transfer to Optus. 4.4 Withholding Tax On each Settlement Date, before Optus draws a Cheque, Lender must lend to Optus an amount equal to the sum of: (a) amounts which are required to discharge Optus obligation to pay Withholding Tax (if any) in relation to the completion of any Buy-Back Agreement which Optus enters into as part of the Transaction; and (b) any fees, duties, levies, taxes or charges which are or will be incurred by Optus in connection with the existence or operation of the bank account described below as it relates to the Transaction, by crediting a bank account of Optus at the Nominated Bank on that date in immediately available funds. 4.5 Buy-Back Consideration (a) The consideration payable by Optus to each Optus Shareholder who enters into a Buy-Back Agreement will be an amount equal to the sum of the following (the Buy-Back Consideration): (i) the cash component of the Offer Consideration due to be paid to the Optus Shareholder (if any) calculated as: (A) the A$ amount; or (B) the A$ Equivalent of the US$ Cash Alternative; and (ii) the A$ Equivalent of the aggregate US$ amount of the Bond Issue Prices (calculated by applying the Announcement Exchange Rate) of the Bond component of the Offer Consideration due to be issued to the Optus Shareholder (if any); (iii) the A$ Equivalent of the Market Value of the SingTel Shares component of the Offer Consideration due to be issued to the Optus Shareholder (if any); and (iv) the Initial Redemption Amount of the Unsecured Notes component of the Offer Consideration due to be issued to the Optus Shareholders (if any). (b) Optus will pay the Buy-Back Consideration to each Optus Shareholder who enters into a Buy-Back Agreement by: (i) firstly, paying the amount of any Withholding Tax to the Australian Tax Office; and (ii) secondly, delivering a Cheque in favour of the Optus Shareholder or order for an A$ face amount equal to the Buy-Back Consideration less the amount of any Withholding Tax to the Optus Shareholders agent, Bidder.
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4.6 Lender to advance monies to Optus (a) On each Settlement Date, before Optus draws a Cheque, Lender must lend to Optus an amount equal to the sum of: (i) the amounts which are required by Optus to pay in full the Cheques to be issued in accordance with clause 4.5(b)(ii); and (ii) any fees, duties, levies, taxes or charges which are or will be incurred by Optus in connection with the existence or operation of Optus Account as it relates to the Transaction, by crediting Optus Account on that date in immediately available funds. (b) In its role as agent, Lender agrees it will not take any action which is not contemplated by this agreement and its role as agent is limited accordingly. 4.7 Presentation of Cheques (a) Bidder, as agent for each Optus Shareholder in whose favour a Cheque has been drawn pursuant to clause 4.5(b), will, immediately after that Cheque has been received endorse that Cheque in favour of Optus or order and present that Cheque to Lender as Optus agent for purchase at a purchase price equal to the face value of the Cheque. (b) Optus appoints Lender as Optus agent for purchase and directs Lender as Optus agent, upon presentation of a Cheque to Lender as Optus agent for purchase pursuant to clause 4.7(a), to purchase that Cheque by drawing on Optus Account for an amount equal to the face value of the Cheque (but so that there will be one aggregate drawing on Optus Account for the Cheques purchased for each Settlement Date) and crediting the amount so drawn to the Bank Account in immediately available funds. (c) Lender must comply with the directions contained in this clause 4.7. 4.8 Subscription for SingTel Shares, Bonds and Unsecured Notes (a) Bidder will, as agent for each Optus Shareholder in whose favour a Cheque has been drawn pursuant to clause 4.5(b): (i) pay from the Subscription Funds the cash component of the Offer Consideration less the amount of any Withholding Tax to the Optus Shareholder as follows: (A) in the case of a shareholder who elected to receive $A, by cheque in $A; or (B) in the case of a shareholder who elected to receive US$, by purchasing US$ on behalf of that Optus Shareholder (at the rate referred to in the definition of A$ Equivalent on the relevant Settlement Date) and sending a cheque in US$ for that amount; (ii) apply the balance of the Subscription Funds on behalf of the Optus Shareholder in subscribing for the relevant number of SingTel Shares, Bonds and Unsecured Notes (as the case may be) due to be issued to the shareholder as contemplated by clause 3.2. However, where an Optus Shareholder chose the Offer Consideration referred to in clause 3.2(a)(i), Bidder (as agent for that Optus Shareholder) will only subscribe for that number of SingTel Shares calculated by dividing the Subscription Funds by the A$ Equivalent of the Market Value of one SingTel Share, rounded up to the nearest whole number of SingTel Shares. (b) SingTel must issue or cause the issue of the SingTel Shares, Bonds and Unsecured Notes referred to in paragraph (a), and must do all things necessary to enable Bidder to give full effect to the arrangements set out in paragraph (a). (c) SingTel must issue the SingTel Shares and Bonds subscribed from time to time pursuant to clauses 3.5, 3.5A and 3.5B by Bidder as agent for a holder of Unsecured Notes. [Clauses 4.9 to 4.13 are Not Extracted]
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SCHEDULE 1
[Not Extracted]
SCHEDULE 2
[Not extracted see Section 9.12]
SCHEDULE 3
[Not Extracted]
SCHEDULE 4
TERMS OF BUY-BACK AGREEMENT This agreement is dated []. PARTIES The Optus Shareholders referred to in Schedule A (Relevant Shareholders), acting through their agent, Bidder (Bidder) Cable & Wireless Optus Limited ACN 052 833 208 (Optus) RECITALS A. Each Relevant Shareholder has accepted the Offer and has chosen the Buy-Back Alternative in respect of the parcel of Optus Shares set out beside that shareholders name in Schedule A (the Relevant Shares). B. Pursuant to the terms of the Offer, each Relevant Shareholder has appointed Bidder as its agent to enter into this agreement and to perform all other actions necessary to give effect to this agreement. C. By choosing the Buy-Back Alternative, each Relevant Shareholder has made a Buy-Back Offer to Optus whereby that Relevant Shareholder has offered to sell to Optus its Relevant Shares on the terms of this agreement. D. Optus accepts the Buy-Back Offer from each Relevant Shareholder and agrees to BuyBack the Relevant Shares on the terms of this agreement.
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OPERATIVE PROVISIONS 1. Definitions and interpretation In this agreement, unless the context otherwise requires: Terms which are defined in the Implementation Agreement have the same meaning in this agreement, unless specifically defined in this agreement. Bidders Statement means the document issued by Bidder to Optus Shareholders in respect of the Offer incorporating the bidders statement for the Takeover Bid (including any supplementary bidders statements). Implementation Agreement means the agreement so titled between SingTel and Optus executed on 25 March 2001, as amended from time to time. Clause 1.2 of the Implementation Agreement applies as if set out in full in this agreement with references in that clause to this agreement being references to this agreement. 2. Sale and purchase Each Relevant Shareholder hereby sells to Optus, and Optus hereby purchases from that Relevant Shareholder, its Relevant Shares for the consideration set out in Clause 3. 3. Buy-Back Consideration (a) The consideration payable by Optus to each Relevant Shareholder is an amount equal to the A$ Buy-Back Consideration for that Relevant Shareholder determined under clause 4.5(a) of the Implementation Agreement. (b) Optus will pay the Buy-Back Consideration to each Relevant Shareholder by: (i) firstly, paying the amount of any Withholding Tax to the Australian Taxation Office; and (ii) secondly, delivering a Cheque in A$ equal to the Buy-Back Consideration less the amount of any Withholding Tax. 4. Cheques Each Relevant Shareholder directs Optus to deliver the Cheque to which it is entitled pursuant to clause 3 to Bidder, as agent for that Relevant Shareholder. Each Relevant Shareholder acknowledges that this will discharge Optus obligation to that shareholder to provide the Buy-Back Consideration. 5. Withholding Tax Each Relevant Shareholder acknowledges and agrees that Optus may withhold from the Buy-Back Consideration due to be paid to that shareholder the amount of any Withholding Tax. 6. Accounting Subject to the Corporations Law, Optus must account for the Buy-Back in accordance with the pro-forma accounting entries set out in Schedule B. 7. Warranties Each Relevant Shareholder warrants to Optus that: (a) Bidder has been duly authorised by the Relevant Shareholder to enter into this agreement on behalf of the Relevant Shareholder; (b) its Relevant Shares are free from encumbrances; (c) the Relevant Shareholder is not, and is not acting on behalf of or for the account of, a Restricted Foreign Shareholder (as defined in the Bidders Statement), unless otherwise indicated on the Acceptance Form (as defined in the Bidders Statement); and (d) the consideration set out in the Schedule in respect of each parcel of Optus Shares: (i) conforms with the terms of clause 4.5 of the Implementation Agreement; and (ii) is in accordance with the election made by the Relevant Shareholder when the Relevant Shareholder accepted the Offer.
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8. Future Dealings with Securities Each Relevant Shareholder agrees that the Relevant Shareholder will not offer or resell in, or to a person in, any country other than Australia any securities which the Relevant Shareholder acquires as a result of the Offer in circumstances which may or would result in: (a) the Offer; (b) Optus involvement in the Buy-Back Alternative; (c) Optus acceptance of any Buy-Back Offer; or (d) Optus conduct in relation to any Buy-Back Agreement, being illegal in any country. Executed as an Agreement [Execution clauses Bidder on behalf of Optus Shareholders Optus]
(To recognise the receipt of the Subordinated Debt from the Lender) Dr Share capital Dr Buy-Back reserve 0.52 1.28 1.8
(To recognise the debt due on transfer of the Optus Shares by way of Buy-Back.) Dr Debt due to Optus Shareholders Cr Cash at Bank 0.19 0.19
(To recognise payment of withholding tax to Australian Tax Office.) Dr Debt due to Optus Shareholders Cr Cash at Bank 1.61 1.61
(To recognise the satisfaction of the remainder of the Buy-Back Consideration by the Cheque payment to Optus Shareholders.)
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I M P L E M E N TAT I O N A G R E E M E N T
On final Settlement Date: Dr Cash Cr Share capital 1.8 1.8
(To recognise subscription for Optus Shares to be issued to Bidder under the Placement and payment of subscription price by cheque.) Dr Subordinated Debt Cr Cash 1.8 1.8
(To recognise endorsement of Bidders cheque in favour of Lender in satisfaction of the Subordinated Debt.)
SCHEDULE 5
Worked example for 2-Stage Redemption of Unsecured Notes A. Partial Redemption on the Interim Maturity Date 1. Assumed Optus shareholder elections
A S AT C L O S E O F O F F E R OPTUS % OF ALL SHARES (M) OPTUS SHARES
All Scrip Scrip and Cash Cash, Bonds and Unsecured Notes Total
2. Consideration payable to Optus shareholders pursuant to clause 3.2 ( prior to redemptions of Unsecured Notes)
UNSECURED NOTES (M) SINGTEL SHARES (M) BONDS (BONDS CASH ISSUE PRICE (A$M) IN A$M)
All Scrip 0 Scrip and Cash 0 Cash, Bonds and Unsecured Notes 2,264 Total 2,264
0 0 1,019 1,019
3. Partial Redemption: Calculation of minimum possible share consideration to Optus shareholders Assume that the remaining 5% of Optus Shareholders elect for the all Scrip alternative As a consequence, no additional cash consideration is payable Hence, the additional cash available and consequent incremental share consideration is calculated as follows: Additional Cash (cl 3.4) Total Cash Pool (A$m) less: Cash and the Bond Issue Price of Bonds payable under clause 3.2 from (A.2) above (A$m) Additional Cash (A$m) 9,250+ 7,671 1,579 1.48 0.70 0.70 1.48 0.70 0.78 0.29 647
Additional Allocated Cash Lesser of: Redemption Amount of (cl 3.4) Unsecured Note (A$); and Additional Cash/Total Unsecured Notes (A$) (A$1,579m/2,264 Unsecured Notes) Additional Allocated Cash (A$) Initial Redemption Amount (A$)
Less: Additional Allocated Cash (A$) Partial Redemption Amount (A$) No. of SingTel shares subscribed for at an issue price of A$2.74 per Unsecured Note (A$0.78/A$2.74) Total SingTel Shares required to be subscribed for by electors of Cash, Bonds and Unsecured Notes Offer: (0.29 x 2,264 shares electing the Cash, Bonds and Unsecured Notes offer)
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I M P L E M E N TAT I O N A G R E E M E N T
4. Partial Redemption Payment
SINGTEL SHARES (M) BONDS (BOND ISSUE CASH PRICE IN (A$M) A$M)
All Scrip Scrip and Cash Cash, Bonds and Unsecured Notes Total B. Redemption on the Final Maturity Date
0 0 647* 647
0 0 0 0
0 0 0 0
1. Actual elections of Optus shareholders Remaining 5.0% of Optus shareholders (following close of offer)
OPTUS SHARES (M) % % OF ALL OPTUS SHARES
All Scrip Scrip and Cash Cash, Bonds and Unsecured Notes Total Total elections of 100% of Optus shareholders
189 0 0 189
100% 0% 0% 100%
5.0% 0% 0% 5.0%
All Scrip Scrip and Cash Cash, Bonds and Unsecured Notes Total
2. Consideration payable to Optus shareholders pursuant to clause 3.2 (prior to redemptions of Unsecured Notes) Remaining 5.0% of Optus shareholders
UNSECURED NOTES (M) SINGTEL SHARES (M)
All Scrip Scrip and Cash Cash, Bonds and Unsecured Notes Total
0 0 0 0
313 0 0 313
SINGTEL SHARES (M)
0 0 0 0
0 0 0 0
All Scrip Scrip and Cash Cash, Bonds and Unsecured Notes Total
0 0 2,264 2,264
0 0 1,019 1,019
3.(A) Final Redemption for Remaining 5% of Optus shareholders (No Partial Redemption) Additional Cash (cl 3.4) Total Cash Pool (A$m) 9,250+ less: Cash and Bond Issue Price of Bonds payable under clause 3.2 from (A.2) above (A$m) 7,671 Additional Cash (A$m) 1,579 Additional Allocated Lesser of: Initial Redemption Amount Cash (cl 3.4) of Unsecured Note (A$); and 1.48 Additional Cash/Total Unsecured Notes (A$) (1,579/2,264 Unsecured Notes) 0.70 Additional Allocated Cash (A$) 0.70 Share subscription Redemption Amount required per Unsecured Initial Redemption Amount (A$) 1.48 Note (cl 3.5(a)) Less: Partial Redemption Amount (A$) 0 Less: Additional Allocated Cash (A$) 0.70 (A$) 0.78 No. of SingTel shares subscribed for at an issue price of A$2.74 per Unsecured Note (A$.78/A$2.74) 0.29
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SingTel Shares required to be subscribed for by electors of Cash, Bonds and Unsecured Notes offer: (0.29 x 0 shares electing the Cash, Bonds and Unsecured Notes offer) 0 Additional Allocated Lesser of: Additional Allocated Cash (A$) 0.70 Bond Amount Max Bond Amount less the (cl3.4(e)(f)) Bond Issue Price of all Bonds/Total Unsecured Notes (A$2,000+A$1,019)/2,264 Unsecured Notes 0.43 Additional Allocated Bond Amount (A$) 0.43 Amount payable in additional bonds to electors of Cash, Bonds and Unsecured Notes offer (Bond Issue Price in A$m): (0.43 x 0 Unsecured Notes) 0 Remaining additional cash payable per Unsecured Note (A$): 0.26 Total amount payable in additional cash (A$m): 0 3.(B) Final Redemption for Unsecured Notes Where Partial Redemption Has Been Made Total Cash Pool (A$m) 9,250+ Additional Cash (cl 3.4) less: Cash and Bond Issue Price of Bonds payable under clause 3.2 from (A.2) above (A$m) 7,671 Additional Cash (A$m) 1,579 Additional Allocated Lesser of: Initial Redemption Amount of Cash (cl 3.4) Unsecured Note (A$); and 1.48 Additional Cash/Total Unsecured Notes (A$) (1,579/2,264 Unsecured Notes) 0.70 Additional Allocated Cash (A$) 0.70 Share subscription Redemption Amount required per Unsecured Initial Redemption Amount (A$) 1.48 Note (cl 3.5(a)) Less: Partial Redemption Amount (A$) 0.78 Less: Additional Allocated Cash (A$) 0.70 (A$) 0 No. of SingTel shares subscribed for at an issue price of A$2.74 per Unsecured Note (A$0.00/A$2.74) 0 SingTel Shares required to be subscribed for by electors of Cash, Bonds and Unsecured Notes offer: (0 x 2,264 shares electing the Cash, Bonds and Unsecured Notes offer) 0 Additional Allocated Lesser of: Additional Allocated Cash (A$) 0.70 Bond Amount Max Bond Amount less the Bond (cl3.4(e)(f)) Issue Price of all Bonds/Total Unsecured Notes (A$2,000+-A$1,019)/2,264 Unsecured Notes 0.43 Additional Allocated Bond Amount (A$) 0.43 Amount payable in additional bonds to electors of Cash, Bonds and Unsecured Notes offer (Bond Issue Price in A$m): (0.43 x 2,264 Unsecured Notes) 981 Remaining additional cash payable per Unsecured Note (A$): 0.26 Total amount payable in additional cash (A$m): 598 4. Final Redemption Payment
SINGTEL SHARES (M) BONDS (BOND ISSUE CASH PRICE IN (A$M) A$M)
All Scrip Scrip and Cash Cash, Bonds and Unsecured Notes Total
0 0 0* 0
0 0 598 598
0 0 981 981
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5. Total Final Consideration
SINGTEL SHARES (M) BONDS (BOND ISSUE CASH PRICE IN (A$M) A$M)
All Scrip Scrip and Cash Cash, Bonds and Unsecured Notes Total
0 0 2,000 2,000+
* Required to be subscribed for + Assumes that there is no rounding down of the interest rate on the Bonds from the Formula Rate and therefore that the Bond Issue Price equals the face value of the Bonds.
SCHEDULE 6
[Not Extracted]
SCHEDULE 7
[Not Extracted the terms of the SingTel Bonds are now reflected in Section 10]
SCHEDULE 8
[Not Extracted]
238
ANNEXURE 3
TERMS AND CONDITIONS OF THE SINGTEL BONDS
239
240
3 STATUS
The Bonds constitute (subject to Condition 4) direct, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu and rateably without any preference or priority among themselves and pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law) of the Issuer.
241
4 NEGATIVE PLEDGE
(a) Restriction: So long as any of the Bonds remains outstanding (as defined in the Trust Deed), the Issuer shall not create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest upon the whole or any part of the undertaking, assets, property or revenues present or future of the Issuer to secure any Relevant Debt, or any guarantee or indemnity in respect of any Relevant Debt; unless, at the same time or prior thereto, the Issuers obligations under the Bonds and the Trust Deed (i) are secured equally and rateably therewith or (ii) have the benefit of such other security, guarantee, indemnity or other arrangement as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders. (b) Relevant Debt: For the purposes of this Condition, Relevant Debt means any present or future indebtedness of the Issuer in the form of, or represented by, bonds, notes, debentures, loan stock or other similar securities that are for the time being, or are capable of being, quoted, listed or ordinarily dealt in on any stock exchange, over-the-counter or other securities market, having an original maturity of more than 365 days from its date of issue and denominated, payable or optionally payable in a currency other than Singapore dollars.
5 INTEREST
Each Tranche A Bond bears interest from [] at the rate of []% per annum, payable semi-annually in arrear on [] and [], in each year, commencing on []. Each Tranche B Bond bears interest from the Issue Date at the rate of []% per annum, payable semiannually in arrears on [] and [], in each year, commencing on []. Each Bond will cease to bear interest from the due date for redemption unless, after surrender of the Definitive Bond, payment of principal is improperly withheld or refused. In such event, it shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant Bondholder, and (b) the day seven days after the Trustee or the Principal Paying Agent has notified Bondholders of receipt of all sums due in respect of all the Bonds up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant Bondholders under these Conditions). If interest is required to be calculated for a period of less than one year, it will be calculated on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed.
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7 PAYMENTS
(a) Method of Payment: Payments in respect of each Bond will be made or procured to be made by the Principal Paying Agent by US dollar cheque drawn on, or by transfer to a US dollar account maintained by the payee with, a bank in New York City. Payments of principal will be made conditional upon surrender of the relevant Definitive Bond at the specified office of any of the Transfer Agents. Interest on Bonds will be paid to the persons shown on the relevant Register at the close of business on the tenth business day before the due date for the payment of interest (the Record Date). Payments will be made by US dollar cheque drawn on a bank in New York City and mailed to the holder (or to the first-named of joint holders) of such Bond at his address appearing in the relevant Register. Upon application by the holder to the specified office of any Transfer Agent not less than 10 business days before the due date for any payment in respect of a Bond, such payment may be made by transfer to a US dollar account maintained by the payee with a bank in New York City. (b) Payments Subject to Fiscal Laws: All payments are subject in all cases to any applicable fiscal or other laws and regulations, but without prejudice to the provisions of Condition 8. No commissions or expenses shall be charged to the Bondholders in respect of such payments. (c) Payment Initiation: Where payment is to be made by transfer to a US dollar account, payment instructions (for value on the due date, or if that is not a business day, for value the first following day which is a business day) will be initiated, and, where payment is to be made by cheque, the cheque will be mailed on the business day preceding the due date for payment or, in the case of payments of principal, if later, on the business day on which the relevant Definitive Bond is surrendered at the specified office of any Transfer Agent. For the purposes of this Condition 7, business day means a day on which commercial banks in New York City and in the case of a surrender of a Definitive Bond, in the place where the Definitive Bond is surrendered, are open or not authorised to close. (d) Delay in Payment: Bondholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due as a result of the due date not being a business day, if the Bondholder is late in surrendering its Definitive Bond (if required to do so) or if a cheque mailed in accordance with this Condition 7 arrives after the due date for payment. (e) Payment Not Made in Full: If the amount of principal or interest which is due on the Bonds is not paid in full, the Registrar will annotate the relevant Register with a record of the amount of principal or interest, if any, in fact paid.
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8 TAXATION
All payments of principal and interest in respect of the Bonds shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within Singapore or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event the Issuer shall pay such additional amounts as will result in receipt by the Bondholders of such amounts as would have been received by them had no such withholding or deduction been required, except that no such additional amounts shall be payable in respect of any Bond: (a) to a holder (or to a third party on behalf of a holder) who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond by reason of his having some connection with Singapore other than the mere holding of the Bond or the receipt of any sums due in respect of such Bond (including, without limitation, the holder being a resident of, or having a permanent establishment in, Singapore); or (b) the Definitive Bond in respect of which is surrendered (where required to be surrendered) more than 30 days after the Relevant Date, except to the extent that the holder of it would have been entitled to such additional amounts on surrender of such Definitive Bond for payment on the last day of such period of 30 days. Relevant Date means whichever is the later of (i) the date on which such payment first becomes due and (ii) if the full amount payable has not been received in New York City by the Principal Paying Agent or the Trustee on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the Bondholders in accordance with Condition 13. Any reference in these Conditions to principal and/or interest shall be deemed to include any additional amounts which may be payable under this Condition 8.
9 EVENTS OF DEFAULT
If any of the following events occurs and is continuing, the Trustee at its discretion may, and if so requested by holders of at least 25% in nominal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution of the Bondholders shall, give notice to the Issuer that the Bonds are, and they shall immediately become, due and payable at their principal amount together with accrued interest: (a) Non-Payment: the Issuer fails to pay the principal of or any interest on any of the Bonds when due and such failure continues for a period of more than seven days in the case of principal or more than 14 days in the case of interest; or (b) Breach of Other Obligations: the Issuer does not perform or comply with any one or more of its other obligations in the Bonds or the Trust Deed which default is incapable of remedy or, if in the opinion of the Trustee capable of remedy, is not in the opinion of the Trustee remedied within 60 days after notice of such default shall have been given to the Issuer by the Trustee; or (c) Cross-Default: (i) any other present or future indebtedness of the Issuer for or in respect of moneys borrowed or raised becomes due and payable prior to its stated maturity by reason of any default, event of default or the like (howsoever described), or (ii) any such indebtedness is not paid when due or, as the case may be, within any applicable grace
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10 PRESCRIPTION
Claims in respect of principal and interest shall be prescribed unless made within a period of 10 years in the case of principal and five years in the case of interest from the appropriate Relevant Date.
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11 ENFORCEMENT
At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce the terms of the Trust Deed and the Bonds, but it need not take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least 25% in principal amount of the Bonds outstanding, and (b) it shall have been indemnified to its satisfaction. No Bondholder may institute proceedings directly against the Issuer unless the Trustee, having become bound so to proceed, fails or neglects to do so within a reasonable time and such failure or neglect is continuing.
13 NOTICES
Notices to Bondholders will be mailed to them at their respective addresses in the relevant Register and shall be published in a leading daily newspaper having general circulation in London (which is expected to be the Financial Times). Any such notice shall be deemed to have been given on the later of the date of such publication and the fourth day after being so mailed.
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15 FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders create and issue further securities of the same class having the same terms and conditions as the Bonds of such class in all respects so that such further issue shall be consolidated and form a single series with the outstanding Bonds of the same class. The original issue of Bonds and any further issues pursuant to this Condition 15 may not in aggregate exceed U.S.$988,000,000. References in these Conditions to the Bonds include (unless the context requires otherwise) any other securities issued pursuant to this Condition and forming a single series with the Bonds. Any further securities forming a single series with the outstanding Bonds of the same class constituted under the Trust Deed or any deed supplemental to it shall be constituted under a deed supplemental to the Trust Deed. The Trust Deed contains provisions for convening meetings of the Bondholders.
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18 GOVERNING LAW
(a) Governing Law: The Trust Deed, the Agency Agreement and the Bonds are governed by, and shall be construed in accordance with, English law. (b) Jurisdiction: The courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the Bonds and accordingly any legal action or proceedings arising out of or in connection with the Trust Deed and the Bonds (Proceedings) may be brought in such courts. The Issuer has in the Trust Deed irrevocably submitted to the jurisdiction of such courts. (c) Agent for Service of Process: The Issuer has in the Trust Deed appointed an agent in England to receive service of process in any Proceedings in England. If for any reason the Issuer does not have such an agent in England, it will promptly appoint a substitute process agent and notify the Bondholders of such appointment in accordance with Condition 13. Nothing herein shall affect the right to serve process in any other manner permitted by law.
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SCHEDULE 1
SUMMARY OF PROVISIONS RELATING TO THE BONDS WHILE IN GLOBAL FORM The Tranche A Global Bond and Tranche B Global Bond representing the Tranche A Bonds and Tranche B Bonds, respectively, contain provisions which apply to the Bonds while they are in global form, some of which modify the effect of the terms and conditions of the Bonds. Terms defined in the terms and conditions have the same meanings in the paragraphs below. The following is a summary of certain of the provisions contained in the Tranche A Global Bond and the Tranche B Global Bond, respectively: Exchange A Global Bond is exchangeable in whole but not in part (free of charge to the holder) for the Definitive Bonds described below (i) if the Global Bond is held on behalf of a clearing system and such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so, or (ii) if the Issuer would suffer a material disadvantage in respect of the Bonds as a result of a change in the laws or regulations (taxation or otherwise) of any jurisdiction referred to in Condition 8 which would not be suffered were the Bonds in definitive form and a certificate to such effect signed by a director of the Issuer is delivered to the Trustee, for display to Bondholders. Thereupon (in the case of (i) above) the holder may give notice to the Principal Paying Agent and (in the case of (ii) above) the Issuer may give notice to the Principal Paying Agent and the Bondholders, of its intention to exchange the Global Bonds for Definitive Bonds on or after the Exchange Date (as defined below) specified in the notice. On or after the Exchange Date, the holder of the Global Bond may surrender the Global Bond to, or to the order of, the Principal Paying Agent. In exchange for the Global Bond, the Issuer shall deliver, or procure the delivery of, an equal aggregate principal amount of duly executed and authenticated Definitive Bonds, security printed in accordance with any applicable legal requirements and in or substantially in the form set out in Schedule 1 to the Trust Deed. On exchange of the Global Bond, the Issuer will, if the holder so requests, procure that it is cancelled and returned to the holder together with any relevant definitive Bonds. Exchange Date means a day falling not less than 60 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Principal Paying Agent is located and, except in the case of exchange pursuant to (i) above, in the cities in which the relevant clearing system is located. Payments Payments of principal and interest in respect of Bonds represented by the Global Bond will be made against presentation for endorsement and, if no further payment falls to be made in respect of the Bonds, surrender of the Global Bond to or to the order of the Principal Paying Agent or such other Paying Agent as shall have been notified to the Bondholders for such purpose. A record of each payment so made will be endorsed in the appropriate schedule to the Global Bond, which endorsement will be prima facie evidence that such payment has been made in respect of the Bonds. Notices So long as the Bonds are represented by the Global Bond and the Global Bond is held on behalf of a clearing system, notices to Bondholders may be given by delivery of the relevant notice to that clearing system for communication by it to entitled accountholders in substitution for publication as required by the Conditions. Prescription Claims against the Issuer in respect of principal and interest on the Bonds while the Bonds are represented by the Global Bond will become void unless it is presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) from the appropriate Relevant Date (as defined in Condition 8).
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TELECOMMUNICATIONS, POSTAL AND BROADCASTING REGULATION IN SINGAPORE
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The following is a general summary of the Singapore laws and regulations relating to provision of telecommunications, postal and broadcasting services in Singapore. It is for general information only, and does not purport to be an exhaustive or comprehensive description of those laws and regulations. Overview of telecommunications, postal and broadcasting services in Singapore The provision of telecommunications services in Singapore is regulated primarily under the Telecommunications Act (Chapter 323) (the Telecommunications Act). The Telecommunications Act provides the general and legal framework for the provision and operation of telecommunications systems and services in Singapore. The IDA is the regulatory authority principally responsible for administering the Telecommunications Act and regulating and promoting the information and communications industry in Singapore. The IDA is a statutory board that was established under the Info-communications Development Authority of Singapore Act (Chapter 137A) (the IDA Act). Pursuant to the IDA Act, the IDAs functions and duties include: promoting the efficiency and international competitiveness of the information and communications industry in Singapore; ensuring that telecommunication services are reasonably accessible to all people in Singapore and are supplied as efficiently and economically as practicable and at performance standards that reasonably meet the social, industrial and commercial needs of Singapore; promoting and maintaining fair and efficient market conduct and effective competition between persons engaged in commercial activities connected with telecommunications technology in Singapore; advising the Government of Singapore on national needs and policies in respect of all information and communications technology matters; exercising licensing and regulatory functions in respect of telecommunications systems and services in Singapore, including the establishment of standards and codes relating to equipment attached to telecommunications and radio-communication systems, and any equipment or software used as an adjunct to or in conjunction with such systems and the monitoring of and access to such equipment and software; exercising licensing and regulatory functions in respect of the allocation and use of satellite orbits and the radio frequency spectrum in Singapore for all purposes, including the establishment of applicable standards and codes; exercising licensing and regulatory functions in respect of the installation, use and provision of submarine cables, cable frontier stations and satellite stations, receivers and transmitters in Singapore and all equipment used in connection therewith; exercising regulatory functions in respect of the determination and approval of prices, tariffs, charges and the provision of telecommunications and related services; and encouraging, promoting, facilitating, investing in and otherwise assisting in the establishment, development and expansion of the information and communications industry in Singapore.
The provision of postal services in Singapore by SingPost is regulated under the Postal Services Act (Chapter 237A) (the Postal Services Act). The Postal Services Act provides for the licensing and regulatory power of the IDA (as the Postal Authority) in respect of postal matters. The Postal Services Act confers on the Postal Authority the exclusive privilege to convey from one place to another letters and postcards and to perform all incidental services of receiving, collecting, sending, despatching and delivering letters and postcards, as well as the right to grant licences in respect of all such services. The Postal Authority may also designate any postal licensee as a public postal licensee to perform all or any of the functions relating to the provision of postal services within the exclusive privilege of the Postal Authority under the Postal Services Act. In providing video-on-demand and Internet services in Singapore, SingTel is regulated by the Singapore Broadcasting Authority (the SBA) under the Singapore Broadcasting Authority Act (Chapter 297) (the SBA Act). The SBAs duties include exercising licensing and regulatory functions in respect of any broadcasting service, which means a service by a person having equipment appropriate for receiving, or receiving and displaying (as the case may be) that service, irrespective of the means of delivery of that service, whereby signs or signals transmitted, whether or not encrypted, comprise (a) any program capable of being received, or received and displayed, as visual images, whether moving or still, (b) any sound program for reception, or (c) any program, being a combination of both visual image (whether moving or still) and sound for reception, or reception and display. In particular, no person may provide the following broadcasting services in or from Singapore without a broadcasting licence granted by the SBA:
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free-to-air localised, nationwide or international television services; subscription localised, nationwide or international television services; free-to-air localised, nationwide or international radio services; subscription localised, nationwide or international radio services; special interest television or radio services; audiotext, videotext and teletext services; video-on-demand services; broadcast data services; and computer on-line services.
SingNet is also regulated by the SBA, being an ISP as defined under the Singapore Broadcasting Authority (Class Licence) Notification 1996. Pursuant to the terms of its class licence, SingNet is subject to the provisions of the Internet Code of Practice issued under section 18 of the SBA Act. Telecommunications Licensing Framework The Telecommunications Act confers on the IDA the exclusive privilege to operate and provide telecommunication systems and services in Singapore, including the rights of establishing, installing, maintaining, developing, constructing, promoting, hiring and selling communication systems and services, as well as the right to grant licences for the running of such telecommunication systems and services. The IDA Act and the Telecommunications Act provide the IDA with broad powers to regulate and monitor licensees and to lay down standards and codes to be observed by operators of telecommunication systems and services. If a licensee is found to be contravening, or has contravened any of the conditions of the licence, any provision of any code of practice or standard of performance, or any direction issued by IDA under the Telecommunications Act, the IDA may issue a written order for compliance, impose a fine, cancel the licence, suspend the licence for a specified period or reduce the term of the licence. The IDA also has the power to modify the terms of a licence. A licensee who is aggrieved by a decision of the IDA may appeal to the Singapore Minister for Communications and Information Technology, whose decision is final. Upon full liberalisation of the telecommunications market being brought forward by two years from 1 April 2002 to 1 April 2000, the IDA released guidelines with respect to the licensing framework under the Telecommunications Act for the provision of telecommunications networks and services in Singapore. The licensing framework seeks to facilitate the entry of new players and the expansion of the scope of operations by existing licensees. IDA has announced that it will not pre-determine the number of licences to be awarded. The IDA issues the following two broad categories of licence: facilities-based operator (FBO) licences; and services-based operator (SBO) licences.
Further authorisation may be required from other government agencies for the deployment or provision of certain types of networks or services. FBOs are individually licensed while SBOs are individually licensed or class-licensed. A class licence is a licensing scheme where the terms and conditions are gazetted. Anyone who provides the services within the scope of the class licence is required to comply with the terms and conditions of the class licence and register with the IDA. There are no foreign equity limits imposed on any licensee, but a licensee must be a company incorporated under the Singapore Companies Act. Facilities-based operator licences FBOs are operators who deploy any form of telecommunications network, system or facility to offer telecommunications switching, transmission capacity and/or telecommunications services to other licensed telecommunication operators, businesses and/or consumers. Facilities in respect of which operators would require an FBO licence include: fixed telecommunications systems (such as exchanges, fibre, ducts, submarine cables, frontier stations and international cable and satellite gateways) needed to offer local and international voice, data and leased circuit services; and mobile communications systems (such as base stations and mobile switching centres) needed to offer public mobile telephone, paging, trunked radio and mobile data services.
The IDA has announced that it will adopt a technology-neutral approach in the licensing of FBOs to ensure that licensees will continually strive to innovate and respond competitively to meet the needs of users. The configuration of the systems deployed and the technology platform (wired or wireless)
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adopted will be left to the choice of the licensee, subject to spectrum and other physical constraints. FBO licences are granted on the merits of the licence application. In considering an application for an FBO licence, the IDA considers, among other things, the applicants commitment to developing and investing in Singapores info-communications infrastructure, its ability to deliver its proposed service or infrastructure commitments, and its commitment to quality of service standards, subject to spectrum and other physical constraints which would limit the number of licences that could be awarded. FBOs are required to comply with interconnection and access obligations as well as the minimum quality of service standards set by the IDA. They are also required to provide the IDA with a performance bond to secure their licence commitments and any additional terms deemed necessary by the IDA. An FBO must obtain the prior approval of the IDA for any proposed changes to the scope of its licensed operations and services. An FBO must obtain the IDAs prior approval for assignment of its licence, and for any change in the FBOs ownership, shareholding or management. Given the significance of the percentage of SingTel Shares to be issued to Optus Shareholders as a result of the Offer, SingTel has obtained the IDAs approval for the changes in its ownership that will result from the Offer. Services-Based Operator Licences SBOs are operators who lease telecommunications network elements (such as transmission capacity, switching services, ducts and fibre) from FBOs to provide telecommunications services to third parties or to resell the telecommunications services of FBOs. SBOs can either be individually licensed or class-licensed. SBO (Individual) Licence In general, operators who lease international transmission capacity for the provision of their services will be licensed individually. Services that are individually licensed include, but are not limited to, international simple resale (ISR), resale of leased circuit services, virtual private network (VPN) services, managed data network services, Internet access services, Internet exchange services, store and forward value-added network services, mobile virtual network operation and live audiotex services. SBO (Class) Licence Services provided over the public switched telephone network or over the public Internet are class licensed. SBO class licence terms and conditions are gazetted. Interested parties are required to register with the IDA and pay the prescribed registration fees. Services that are class-licensed include resale of public switched telecommunication services, callback/call re-origination services, Internet-based voice and data services, store and retrieve value-added network services, international calling card services and audiotex services. SBO licences may cover more than one service category. An SBO must obtain the prior approval of the IDA for any proposed changes to the scope of its licensed operations and services. 3G licensing IDA announced on 11 April 2001 that three eligible bidders, MobileOne (Asia) Pte Ltd, SingTel Mobile and StarHub Mobile Pte Ltd, were each provisionally awarded a 3G spectrum right of their choice. Each 3G licensee was required to pay a licence fee of S$100 million to IDA by 23 April 2001. On 23 April 2001, SingTel Mobile was awarded a 3G spectrum right and an FBO licence to provide 3G mobile communications services within Singapore. 3G licensees are required to roll out their nationwide network by 31 December 2004, but the IDA may review that deadline, in light of market reports on likely delays in the delivery of network equipment and handsets for cellular services and international market developments. An incumbent FBO operating public cellular mobile telephone services networks, and who is also granted a 3G FBO licence, must offer roaming services on their existing cellular networks to new 3G entrants. If agreement cannot be reached in negotiations between an incumbent FBO and a new 3G entrant, the IDA will intervene to help establish a roaming agreement. The price and non-price terms and conditions determined by the IDA will apply (unless there are reasons justifying departure) to all other incumbent operators who are unable to commercially negotiate such roaming agreements with new 3G licensees.
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Material FBO Licences held by SingTel
FBO LICENSEE I S S U E / R E N E WA L D AT E E X P I RY D AT E L I C E N S E D FA C I L I T I E S
SingTel
1 April 1992
31 March 2017
Establishment, installation and maintenance of telecommunications systems to operate and provide international and domestic telecommunication services including public switched telephone services, public switched message services, public switched integrated service digital network (ISDN) services, leased circuit services, public switched data services and public radiocommunication services. SingTel is also designated a Public Telecommunication Licensee under section 6 of the Telecommunications Act.
31 March 2017
Establishment, installation and maintenance of telecommunication systems for the purposes of operating and providing public cellular mobile telephone services (including voice telephony, voice messaging services, short messaging services, international roaming services, operator services and other value added services).
SingTel Mobile
23 April 2001
31 December 2021 Establishment, installation and maintenance of 3G mobile communications systems for the provision of 3G mobile communications services. The IDA has also granted SingTel Mobile the right to use the following paired and unpaired radio frequency spectrum which has been allocated to SingTel Mobile for the purposes of operating the 3G mobile communications systems for the provision of 3G services: (i) the paired radio frequency band consisting of the range of radio frequencies between the upper and lower frequency limits of the radio frequency bands specified below: Lower Band Lower Frequency Limit = 1935.1 MHz Upper Frequency Limit = 1950.1 MHz Upper Band Lower Frequency Limit = 2125.1 MHz Upper Frequency Limit = 2140.1 MHz
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FBO LICENSEE I S S U E / R E N E WA L D AT E E X P I RY D AT E L I C E N S E D FA C I L I T I E S
(ii) the unpaired radio frequency band consisting of the range of radio frequencies between the upper and lower frequency limits of the radio frequency band specified below: Unpaired Band Lower Frequency Limit = 1909.9 MHz Upper Frequency Limit = 1914.9 MHz SingTel Paging** 1 April 1992 31 March 2017 Establishment, installation and maintenance of telecommunication systems for the purposes of operating and providing public radio paging services, public cordless telephone services and public mobile data and location tracking services. Public radio paging services include auto paging services, operator-assisted services, information services and direct access paging services.
* This licence was originally issued to SingTel on 1 April 1992 and was subsequently assigned to SingTel Mobile on 31 October 1994. ** This licence was originally issued to SingTel on 1 April 1992 and was subsequently assigned to SingTel Paging on 31 October 1994.
SingNet
25 May 2000
24 May 2003
Operation and provision of public Internet access services, virtual private network services and international simple resale services. Provision of live audiotex services.
17 April 2000
30 June 2002
31 July 2004
SingPost
1 April 1992
31 March 2017
Provision of international and domestic postal services (in particular, conveyance, receipt, collection, sending, despatch and delivery of letters within, from and to Singapore and conveyance, receipt, collection, sending, despatch and delivery of postcards within, from and to Singapore). Provision of express letter service.
SingPost
28 February 2004
Other Licences SingTel holds a licence for the provision of video-on-demand services in Singapore. This was issued by the SBA on 15 November 1997 and will expire on 14 November 2002. SingTelSat Pte Ltd, a subsidiary of SingTel, holds a satellite system licence from the IDA to utilise the Singapore registered satellite orbital slot and to establish, install and maintain the satellite system for the carriage of signals for telecommunication and broadcasting. This licence was granted to SingTelSat on 26 October 1998 and will be valid for the duration of the design lifetime of the satellite of 12 years.
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Code of Practice for Competition in the Provision of Telecommunications Services Pursuant to section 26 of the Telecommunications Act, the IDA may from time to time issue and review codes of practice and standards of performance in connection with: the operation of telecommunications systems and equipment; the provision of telecommunications services; and the conduct of telecommunications licensees in the provision of telecommunication services.
Every telecommunications licensee is required to comply with the codes of practice and standards of performance applicable to it. To provide a regulatory framework for the development of a fully competitive telecommunication market in Singapore, the IDA issued a Code of Practice for Competition in the Provision of Telecommunication Services (the Code). The Code sets out the IDAs regulatory principles and contains provisions relating to duties of licensees to their end-users, required co-operation amongst licensees to promote competition, interconnection, infrastructure sharing, sector-specific competition rules and enforcement mechanisms. The Code is intended to: promote the efficiency and international competitiveness of the information and communications industry in Singapore; ensure that telecommunication services are reasonably accessible to all people in Singapore, are supplied as efficiently and economically as practicable and at performance standards that reasonably meet the social, industrial and commercial needs of Singapore; promote and maintain fair and efficient market conduct and effective competition between persons engaged in commercial activities connected with telecommunication technology in Singapore; promote the effective participation of all sectors of the Singapore information and communications industry in markets (whether in Singapore or elsewhere); encourage, facilitate and promote industry self-regulation in the information and communications industry in Singapore; and encourage, facilitate and promote investment in and the establishment, development and expansion of the information and communications industry in Singapore.
Regulatory Principles under the Code The Code sets out the principles that will guide the IDA in the implementation of the provisions of the Code. These include: maximum reliance on voluntary negotiations and market forces where effective competition exists; clear and effective regulatory requirements to promote full competition where it does not yet exist; use of regulation that is no more burdensome than necessary to achieve regulatory goals; technological neutrality; and open and reasoned decision-making.
The Code came into effect on 29 September 2000. The IDA will review and amend or remove provisions from the Code that cease to be necessary as competition develops. It will also conduct a review of the provisions of the Code not less than once every three years. The Code also provides for IDAs authority to grant exemptions from, modify or suspend the Code. Classification of Facilities-Based Licensees The Code distinguishes between licensees that are subject to competitive market forces (non-dominant licensees) and those whose conduct is not constrained adequately by competitive market forces (dominant licensees). The IDA will classify a licensee as either a dominant licensee or non-dominant licensee. A licensee will be classified as dominant if it controls facilities that provide a direct connection to endusers within Singapore, regardless of the technology used, and: the facilities are sufficiently costly or difficult to replicate such that requiring new entrants to do so would create a significant barrier to rapid and successful entry by an efficient competitor; or the licensee has the ability to restrict output or raise prices above competitive levels for telecommunications services provided to end-users over those facilities.
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A dominant licensee must comply with special requirements set out in the Code. There are procedures by which a dominant licensee can seek reclassification or an exemption on a service or facilities specific basis, from these special requirements. Pursuant to the provisions of the Code, the IDA has designated SingTel and Singapore CableVision Limited (which is not related to SingTel) as dominant licensees with effect from 29 September 2000. Duties to End-Users under the Code Licensees must modify their service agreements with their business or residential end-users to incorporate certain basic requirements, including the following duties: to to to to comply with minimum quality standards; provide accurate and timely bills; provide fair dispute resolution procedures; and protect end-user service information.
In addition, dominant licensees are required to provide telecommunications services on demand, on an unbundled basis, on prices, terms and conditions that are just, reasonable and non-discriminatory, and pursuant to tariffs approved by the IDA. The Code sets out the procedure that the IDA will use to assess a dominant licensees tariffs. Interconnection Obligations under the Code Minimum Interconnection Duties In order to ensure seamless any-to-any communications throughout Singapore, FBOs and SBOs that use switching or routing equipment to provide telecommunication services to the public are required to satisfy the minimum interconnection duties set out in the Code (Minimum Interconnection Duties). For example, licensees must, whether directly or indirectly, interconnect with any other licensee that seeks to do so, must establish compensation agreements for the origination, transit and termination of telecommunication traffic and provide billing information. The IDA will allow non-dominant licensees to interconnect, without the IDAs prior approval, on any terms agreed between the non-dominant licensees, so long as they satisfy the Minimum Interconnection Duties. The Code also specifies additional obligations that licensees must fulfil even in the absence of an interconnection agreement, such as publicly disclosing its network interfaces (necessary to allow the deployment of telecommunication services and equipment that can interconnect and inter-operate with its network), complying with mandatory technical standards, facilitating number portability and rejecting certain discriminatory preferences (for example, having access to towers, ducts, or conduits controlled by its affiliated entity at prices, terms and conditions that are not available to all other similarly situated licensees). Interconnection with Dominant Licensees The Code also sets out the interconnection obligations of dominant licensees. A licensee that seeks to interconnect with a dominant licensee (Requesting Licensee), can choose any of three options in order to enter into an interconnection agreement. First, the Requesting Licensee can accept the provisions specified in the dominant licensees Reference Interconnection Offer (RIO) which is developed by the dominant licensee and has been approved by the IDA. Second, the Requesting Licensee can opt-in to an existing agreement between the Dominant Licensee and any similarly situated licensee. Third, the Requesting Licensee can seek to negotiate an individualised interconnection agreement with the dominant licensee. Subject to certain provisions in the Code, SingTels RIO (updated as of 21 March 2001, and which is publicly available on the IDAs website), provides that the prices, terms and conditions contained in any interconnection agreements arrived at by accepting the RIO will be effective for three years from the effective date of the Code. The Code contains detailed requirements regarding the terms that a dominant licensee must include in its RIO and also detailed procedures regarding the negotiation process. The IDA will allow a dominant licensee to enter into mutually agreed interconnection agreements provided that the Minimum Interconnection Duties are satisfied and do not discriminate against other licensees, and if the licensees are unable to reach agreement within 90 days of the date on which the Requesting Licensee submitted its request to negotiate an individualised interconnection agreement, either party may request the IDA to conduct a dispute resolution exercise. To the extent that an issue in dispute is addressed by the prices, terms and conditions of the dominant licensees RIO approved by the IDA, the IDA will apply those provisions. To the extent an issue in dispute is not addressed by the RIO, the IDA will have full discretion
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to impose whatever solution it deems appropriate (even if neither licensee advocates that solution). The IDA requires the parties to agree that any disputes regarding the implementation of an interconnection agreement arrived at through the dispute resolution exercise conducted by the IDA will be referred to the IDA for resolution. Infrastructure Sharing under the Code The Code permits a licensee to request the right to share infrastructure controlled by another licensee. The licensees must first attempt to negotiate a voluntary sharing agreement. If they are unable to do so, the requesting licensee may ask the IDA to make a determination as to whether the infrastructure must be shared either because it constitutes Critical Support Infrastructure (as defined in the Code) or because the IDA concludes that sharing it would serve the public interest. The Code designates certain infrastructure that licensees must share at cost-based prices such as masts, poles and towers. Upon receiving all information required by the IDA in relation to any infrastructure sharing dispute, the IDA will, in accordance with the Code, issue a binding direction as to whether the licensee that controls the infrastructure is required to share it. Where the licensees are unable to reach a sharing agreement after the IDA has directed that a specific infrastructure has to be shared, the requesting licensee may ask the IDA to conduct a dispute resolution exercise under the Code. Competition Rules under the Code The Code sets out rules that preclude licensees from engaging in unilateral anti-competitive conduct. A dominant licensee must not abuse its market position in a manner that unreasonably restricts competition, for example, it may not set prices at levels that are so low as to unreasonably restrict competition, nor may it leverage its position in the market to impede competition in an adjacent, currently competitive market. The Code prohibits licensees from entering into agreements that unreasonably restrict competition and sets out a framework by which the IDA will assess the permissibility of such agreements. Licensees are prohibited from entering into certain types of agreements, such as price fixing arrangements or group boycotts. The permissibility of a licensee entering into other agreements, such as joint research or marketing ventures, will be assessed based on each agreements likely or actual impact on competition. In addition, licensees are subject to a prohibition on engaging in unfair methods of competition such as false advertising or unnecessarily degrading the quality of a competitors service. Each FBO licence issued by the IDA requires the licensee to obtain the IDAs approval prior to any assignment of the licence or any change in the ownership, shareholding or management of the licensee. The IDA will not approve a request to assign an FBO licence or a change of ownership, shareholding or management of an FBO licensee in connection with a proposed consolidation that is likely to unreasonably restrict competition. Enforcement The IDA may enforce the provisions of the Code by initiating an enforcement action either on its own initiative or in response to a request filed by a third party. Such actions must be initiated within two years after the date on which the alleged contravention occurred or, in certain cases, within two years after the date of discovery of the alleged contravention. In enforcing the provisions of the Code, the IDA may issue warnings, directions or orders to cease and desist. The IDA may also impose financial penalties and suspend, shorten the duration of, or terminate a licensees licence. While reserving the right to impose financial penalties of up to S$1 million, the IDA will consider all relevant aggravating or mitigating factors in order to ensure that any financial penalty imposed is proportionate to the contravention. Quality of Service Standards The IDA regulates the performance of service operators by setting the quality of service standards by reference to primary and secondary performance indicators. Generally, primary performance indicators relate to standards that tend to have a wider public impact over a longer period of time and which can cause major public inconvenience should there be failure of compliance. Service operators must submit quarterly reports regarding their service quality to the IDA. The IDA also conducts surveys to monitor customer satisfaction and to obtain consumer feedback on how services may be further improved. Based on these findings, service operators are instructed by the IDA to correct their areas of weakness. The findings are also used to fine-tune the IDAs performance quality standards. The IDA has established a penalty framework for non-compliance with quality of service standards (up to a penalty of S$5,000 per primary indicator per month and S$1,000 per secondary indicator per month).
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MATERIAL SINGTEL INFORMATION RELEASES
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Since 31 March 2000 (being the date of the balance sheet in SingTels most recently published annual report), SingTel has made the following material public announcements and media releases to the SGX-ST: On 17 April 2000, SingTel announced to the SGX-ST that SingTel Yellow Pages, has extended a six month convertible loan of 480 million baht to Teleinfo Media Co., Ltd (Teleinfo Media) of Thailand. The loan provides SingTel Yellow Pages with the option to take a 25% stake in Teleinfo Media at the end of the six month period. On 3 May 2000, SingTel announced to the SGX-ST that it has agreed to buy a 31% stake in Point Asia Dot Com (Thailand) Limited, the parent company of Thailands leading Internet Service Provider, Loxley Information Service Company Limited, for US$23 million. On 31 May 2000, SingTel announced to the SGX-ST that SingaSat Private Limited, SingTels wholly-owned subsidiary which holds its satellite investments, has doubled its stake in Hong Kong based APT Satellite International Company Limited (APT International) from one seventh to two sevenths (28.57%). APT International holds 51% of APT Satellite Holdings Limited. On 13 June 2000, SingTel announced to the SGX-ST that SingTel Ventures (Singapore) Private Limited, a wholly-owned subsidiary of SingTel, has acquired 63,158 series A preferred shares of S$1.00 each in the capital of Airgateway.com Private Limited, representing a 24% interest in Airgateway.com. On 21 June 2000, SingTel announced to the SGX-ST that APT Satellite Glory Limited (APT Glory), a wholly-owned subsidiary of APT Satellite, and SingaSat Private Limited (SingaSat) signed a joint venture agreement in relation to APT Satellite Telecommunications Limited (APT Telecom). APT Telecom is 55% owned by APT Glory and 45% owned by SingaSat. APT Telecom was granted an external satellite-based Fixed Telecommunication Network Services Licence in Hong Kong on 19 June 2000 by the Office of Telecommunications Authority of Hong Kong. Under the terms of the licence, APT Telecom, which is based in Hong Kong, will be able to offer external telecommunications services in the Hong Kong Special Administrative Region through APT Satellites APSTAR satellites and other systems. On 18 July 2000, SingTel announced to the SGX-ST that it has formed a subsidiary, C2C AsiaPac Pte Ltd, to embark on the construction of the C2C cable network, a state of the art pan-Asian submarine cable system. On 24 July 2000, SingTel announced to the SGX-ST that other leading companies in Asia and the USA have become shareholders of C2C, a new cable builder and operator formed by SingTel. The announcement states that the new shareholders of C2C include Globe Telecom of the Philippines, GNG Networks, Inc. of South Korea, iAdvantage (Network) Offshore Limited of Hong Kong, KDDI (formerly known as KDD) of Japan, NCIC of Taiwan and Norwest Venture Partners of the USA, among others. With the participation of the new shareholders, SingTels stake in C2C was reduced to about 60%. On 27 July 2000, SingTel announced to the SGX-ST that it has invested US$45 million for a 30% stake in Infoserve Technology Corporation, a leading Asian ISP with operations in Taiwan, Japan, Hong Kong and the USA. On 27 July 2000, SingTel announced to the SGX-ST that SingPost, TNT Post Group NV (TPG) and the British Post Office had signed a joint venture agreement to establish a global cross border mail alliance. The alliance would be constituted by a global joint venture company (JVC) in which TPG would have a 51% stake and the British Post Office and Singapore Post would each have a 24.5% stake, as well as an Asia Pacific joint venture company to be incorporated in Singapore in which Singapore Post would have a 50% stake and the global JVC would hold the balance of 50%. The joint venture agreement is subject to conditions precedent, including the approval of relevant authorities. On 28 July 2000, SingTel announced to the SGX-ST that NCS, a wholly-owned subsidiary of SingTel, has acquired a 70% interest in Shanghai Zhong Sheng Information Technology Co Limited. On 7 August 2000, SingTel announced to the SGX-ST that SingTel International has entered into agreements with the Bharti Group for the acquisition by SingTel International or its nominees of the following: an aggregate interest of approximately 20% in the share capital of Bharti Telecom Limited; and an interest of approximately 15% in the issued capital of Bharti Tele-Ventures Limited.
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On 21 August 2000, SingTel announced to the SGX-ST that following the lifting of the foreign shareholding restrictions in the Taiwanese telecommunications sector, SingTel has increased its interests in NCIC from 18% to 24.3%. On 6 October 2000, SingTel announced to the SGX-ST that it has been informed by the Inland Revenue Authority of Singapore that the compensation payment of $859 million to be made to SingTel by the IDA of Singapore in respect of the accelerated liberalisation of the communications market from 1 April 2000 would not attract any income tax liability. The Inland Revenue Authority of Singapore has advised that this interpretation would also apply to the earlier compensation payment of S$1.5 billion made to SingTel in 1997. On 24 October 2000, SingTel announced to the SGX-ST that SingTel and Bharti Enterprises, are setting up a joint venture to build and operate Indias first private sector submarine fibre-optic cable network. The announcement states that the venture plans a total investment of US$650 million. A consortium of Alcatel Submarine Networks of France and Fujitsu Limited of Japan has been selected to design, manufacture, install and commission the Singapore-Chennai cable. The value of the supply contract is nearly US$250 million. Construction has commenced and the cable is expected to start carrying commercial traffic by end 2001. On 10 November 2000, SingTel announced to the SGX-ST its half year results for the six months ended 30 September 2000. The announcement stated that the compensation payments from the Singapore Government for modification of SingTels original licence and the earlier introduction of market liberalisation are accounted for as deferred compensation in the balance sheet and recognised on a straight line basis over seven financial years from 1 April 2000. The compensation payments have been ruled by the Inland Revenue Authority of Singapore as not taxable. The IDA has claimed that the assumed tax component on the compensation payment of S$1.5 billion in 1997 should be repaid by SingTel. On 20 November 2000, SingTel announced to the SGX-ST that it had entered into a joint venture agreement with the Virgin Group. The announcement states that SingTel and the Virgin Group will have an equal shareholding in a joint venture company, which will be known as Virgin Mobile Asia. The initial funding for this joint venture was US$100 million, funded equally by SingTel and the Virgin Group. The announcement states that SingTel will grant to Virgin Mobile Asia a secured convertible loan facility of up to US$450 million, on commercial terms, to be used for regional expansion under a jointly agreed business plan. Virgin Mobile Asia will have a 30 year licence to use various Virgin trade marks in the Asian region. Singapore Telecom Mobile Private Limited will supply or procure the supply of telecommunications services to the joint venture in Singapore. On 23 November 2000, SingTel announced to the SGX-ST that SingTel and STT Communications Ltd, a subsidiary of Singapore Technologies Telemedia Pte Ltd, have entered into an agreement to merge their trunked radio service operations. The announcement states that the new joint venture company, to be named Digital Network Access Communications Pte Ltd (DNA Comms), will offer trunked radio services, a wireless communications service using handsets that function as both a two-way radio as well as a phone. SingTel and STT Communications will hold equal stakes in DNA Comms. On 24 November 2000, SingTel announced to the SGX-ST that SingTel International has subscribed P929,421,000 for 1,281,960 Philippine Deposit Receipts issued by Globe Telecom Holdings Inc. In connection with this Philippine Deposit Receipts issue, Globe Telecom has issued additional shares, reducing SingTel Internationals direct shareholding in Globe Telecom from 39.07% to 35.63%. On 7 December 2000, SingTel and KDDI (formerly known as KDD) announced that the joint venture plan between the parties entered into in November 1999 would be put on hold. On 31 January 2001, SingTel announced to the SGX-ST that Asias two e-powerhouses, Singaporebased SESAMi.com and Hong Kong-based Asia2B.com Holdings Limited (Asia 2B), will merge to create the Asia Pacific regions foremost e-commerce service provider and operator of the leading e-hub in Asia. The announcement states that the newly merged entity will be known as SESAMi Inc. The shareholder weighting will be evenly split: Asia 2Bs and SESAMi.coms existing stakeholder groups will hold 50% of the shares each. SingTel, which held an 89% interest in SESAMi.com prior to the joint venture, now holds a 44.5% interest in the new joint venture company.
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On 2 February 2001, SingTel announced that its wholly-owned subsidiary, SingTel Yellow Pages, had acquired a 25% stake in Teleinfo Media Co., Ltd. On 15 February 2001, SingTel announced to the SGX-ST that it had submitted a non binding indicative expression of interest for the acquisition of shares in Optus. The acquisition is subject to the approval of the Board of Directors and all other necessary regulatory and other approvals. On 19 February 2001, SingTel announced that it has launched a S$1 billion bond issue as part of its effort to continually optimise its capital structure. On 7 March 2001, SingTel announced to the SGX-ST that Globe Telecom and its principal shareholders Ayala Corporation (Ayala) and SingTel International have signed a series of agreements with Asiacom Philippines, Inc (Asiacom) and DeTe Asia Holding GmbH (DeTeAsia), a wholly-owned subsidiary of Deutsche Telekom AG, to facilitate the acquisition by Globe Telecom of 100% of Isla Communications, Co. (Islacom). DeTe Asia and Asiacom will become shareholders in Globe Telecom, and SingTel International and Ayala will acquire shares in Asiacom. The announcement states that the transaction is subject, inter alia, to the approval of the Philippine Securities and Exchange Commission. The National Telecommunications Commission approved the acquisition by Globe Telecom of 100% of Islacom on 2 February 2001. On 26 March 2001, SingTel announced to the SGX-ST that it has announced a bid for Optus. The announcement states that Optus Shareholders will be offered 1.66 SingTel Shares, or 0.8 SingTel Shares plus A$2.25 cash, or 0.54 SingTel Shares plus A$2.00 cash plus A$0.45 SingTel US$ denominated bonds. The announcement states that the terms of this Offer imply an equity purchase range of A$14.9 billion to A$16 billion. If the Offer succeeds, SingTel will seek a general listing on the ASX. On 12 April 2001, SingTel announced to the SGX-ST that it had mandated Citibank and Salomon Smith Barney as the coordinator and Mandated Lead Arranger for a bridging loan facility of up to A$3 billion. The announcement states that the loan will be used to finance SingTels proposed acquisition of Optus. On 27 April 2001, SingTel announced to the SGX-ST that the Singapore Minister for Finance (Incorporated) has given written notice of the surrender of all special rights attached to the Special Share and conversion of the Special Share to an ordinary share with effect from the date the Articles of Association are altered to delete reference to the Special Share and the Special Member (the Singapore Minister for Finance (Incorporated)). On 4 May 2001, SingTel announced to the SGX-ST that it had acquired a 30% interest in SDT, which, in turn, has a 47.55% interest in DPC. DPC operates and provides PCN cellular services in Thailand. On 7 May 2001, SingTel announced that it will increase its investment in the Bharti Group by up to US$200 million. SingTels latest commitment will increase its total investment in the Bharti Group to US$650 million. SingTel stated that Bharti had also announced that a number of financial investors including E.M. Warburg Pincus have separately committed investments totalling up to US$260 million. On 9 May 2001, SingTel announced to the SGX-ST that it has received the modifications from ASIC and the ASX referred to in its 26 March 2001 announcement of its offer for Optus. The announcement states that the IDAs approval has been obtained, while the process of obtaining others is progressing well. On 10 May 2001, SingTel made an announcement to the SGX-ST of its audited results for the year ended 31 March 2001.
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MATERIAL OPTUS INFORMATION RELEASES
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Since 31 March 2000 (being the date of the balance sheet in the last annual report), Optus has made the following material public announcements and media releases: On 3 April 2000, Optus announced that it had signed a wholesale communications capacity deal to provide AAPT with a national backbone network. The announcement states that the deal with AAPT is part of a series of wholesale capacity deals that the company has done over the last financial year on each of its five networks. The new capacity will be used to extend the geographic reach of AAPTs existing network as well as providing telephone and data transmission for its mobile and LMDS networks. AAPT is expected to be able to access its new network capacity in approximately 12 months. On 4 April 2000, Optus announced the rollout of Australias first operational high speed mobile data network, using GPRS technology. Using this technology Optus will be able to deliver data to mobile phones up to four times faster than is currently available. GPRS works by breaking information into discrete packets for faster transmission. This makes it ideal for delivering data such as internet and intranet pages, graphics and even video to mobile phones and other mobile devices. On 12 April 2000 Optus announced that Australias three GSM mobile network service providers, Telstra, Optus and Vodafone, had finalised arrangements that will enable GSM customers to send SMS text messages to each other using their mobile phones. SMS messages are created by using the keypad on a mobile phone to type a text message that can then be sent to other mobile phones. Prior to these arrangements customers could only send messages to people on the same mobile network. The new intercarrier SMS service will be available to all three service providers GSM customers with SMS compatible handsets from Wednesday 12 April 2000. On 12 April 2000 Optus announced that it had signed a deal with internet retailer dstore to deliver online shopping through WAP (Wireless Application Protocol) to mobile phones. Customers will be able to buy goods and services using the keypad of a mobile phone handset to enter credit card details. At launch, consumers will be able to select items from a range of dstores most popular categories including books, music CDs, videos, games, DVDs, toys and sporting goods. The dstore content will be available on Optus Networker in early May 2000. Optus Networker is available to Optus GSM mobile customers with a WAP capable mobile phone. On 23 May 2000, Optus announced that it had signed a six year, A$42 million contract with Airservices Australia (Airservices) to provide a national integrated communications network. The announcement states that Optus has been a long term supplier of satellite services to Airservices and this new contract will see Optus provide a range of land-based communication capabilities. Airservices is the commercial authority responsible for air space and air traffic flow management, navigation services, search and rescue alerts and fire fighting at airports. Under the contract Optus will provide a sophisticated combination of communication infrastructure including satellite, fibre optic cable and frame relay services to link over 30 locations around Australia, including the major airports. On 26 May 2000, Optus announced that it had sold its Optus Health Solutions business to IBA Technologies Limited (IBA). Under the terms of the deal, Optus will take an 8% stake in IBA and an option to acquire a further 5%. In exchange, IBA will acquire Optus Health Solutions business. Optus Health Solutions provides electronic claiming and billing systems for general practitioners and allied health professionals. John Filmer, Director of Enterprise Cable & Wireless Optus, will join the IBA board. On 5 June 2000, Optus and the Virgin Group announced that they have formally established an Australian joint venture company, Virgin Mobile Australia. The establishment of the company cements an announcement in February that Optus and Virgin had signed a Heads of Agreement to form a joint venture. On 7 June 2000, Optus announced its Application Service Provider push into the Australian market on the back of a global alliance between Cable and Wireless plc and key global industry players Compaq and Microsoft. Optus, in partnership with Compaq and Microsoft, will deploy Microsoft Office and Outlook as a hosted application set to the small and medium enterprise (SME) market. The announcement states that Compaq will be providing a range of internet access devices such as iPAQ Pocket PC through to storage and server infrastructure. Optus and Compaq will develop selected channels to market and sell the new services. Optus will continue to expand the application portfolio to SMEs and will incorporate the Commerce One procurement application into the offering among others.
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On 8 June 2000, Optus announced that using Dense Wavelength Division Multiplex (DWDM) technology it will increase 40 fold the capacity of its fibre optic network. The system will provide up to 40 wavelength channels at 10Gbps with the ability to expand to 160 channels. The announcement states that Optus is set to award multi-million dollar contracts for DWDM technology to Nortel Networks and Fujitsu. DWDM is a technology which increases the capacity of existing optic fibres by using multiple lasers and transmitting multiple light signals over a single optical fibre. The DWDM equipment is expected to be installed and in use by October 2000. On 14 June 2000, Optus announced a strategic alliance between its wholly owned subsidiary XYZed and Lucent Technologies to build a national digital subscriber line network to deliver broadband access to business customers. Lucent will build, manage and maintain the initial XYZed network including the provisioning of equipment in Telstra exchanges and customer premises, as well as performance monitoring and field maintenance. XYZed will use the AnyMedia@Access System, Lucents integrated narrowband and broadband access platform, to provide broadband services in key metropolitan areas. XYZeds high speed access service will be marketed through wholesale agreements with Optus, other service providers and businesses from September 2000. On 15 June 2000, Optus announced that it would move quickly to take advantage of the new global alliance between German based software house SAP and US based business to business e-commerce specialist, Commerce One, to deliver integrated B2B (business to business) solutions to its customers. Optus is the exclusive licence holder of Commerce Ones MarketSite in Australia and New Zealand. Optus launched Australias first internationally recognised B2B e-commerce platform CWO MarketSite and Enterprise Buysite in early 2000. MarketSite is an electronic marketplace allowing business to trade online in real time. The portal links to suppliers, contains supplier catalogues and processes transactions. On 23 June 2000, Optus announced that it had closed an issue of US$500 million of senior unsecured guaranteed notes through a private placement to institutional investors in the United States on Thursday 22 June. The notes carry a coupon of 8% in US$ and Optus has swapped the notes back to A$. The issue was announced and priced within four days reflecting strong investor demand. The announcement states that the issue was a huge success in terms of timing, execution and pricing. Allocations were made to over 75 investors and the issue builds on Optus US investor base. On 13 July 2000, Optus announced that it had won a contract valued at up to A$18 million over three and a half years to supply and manage all of the South Australian Governments mobile telephone services. The contract will cover an initial 18 month period followed by two one-year optional extensions. Under the terms of the contract, Optus will be the supplier of mobile fleet management services to over 160 South Australian Government agencies and will oversee the Governments mobile inventory, providing web-based billing and reporting services as well as managing the mobile services provided by other service providers. The contract includes a commitment by Optus to accelerate the roll-out of its GSM mobile telephone infrastructure, to add another 50 base stations to the 133 already in operation in South Australia. On 18 July 2000, Optus announced the launch of Ozitalk, a network of unique worldwide alliances with the aim of putting an Optus mobile into the hands of every overseas visitor. The alliances include major communications service providers, airlines and overseas retailers. Ozitalk caters for inbound travellers communication needs by providing services from mobiles to calling cards as well as offering travel assistance. The announcement states that, using Ozitalk, tourists will be able to buy or rent a pre-paid mobile phone or purchase a global calling card, quickly and easily from anywhere in the world. In addition, Ozitalk will also provide a 24 hour help hotline including medical and legal advice, automotive assistance, translator services and travel tips. On 8 August 2000 Optus announced alliances with Computer Science Corporation, IBM and Nokia that will deliver the next generation of mobile data services for business. Optus and Nokia had also agreed to launch a data incubator centre, which will develop data business applications specifically for WAP, GPRS and other mobile technologies. The announcement states that the alliances will provide solutions allowing the transition of corporate systems to the mobile environment. Earlier this year Optus launched Australias first operational GPRS network.
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On 8 August 2000, Optus announced that it had formed a partnership with the worlds largest internet telephony service provider, ITXC Corp, to further the rollout of the Optus network onto its Voice Over Internet Protocol (VoIP) network. The partnership allows Optus to increase the reach of its worldwide network ahead of other Asia Pacific communication service providers. The announcement states that the added benefits of the VoIP partnership are reduced internet transport costs while service provider grade quality is assured through the combination of Optus stringent performance systems and ITXCs patent-pending BestValue Routing Technology. The announcement states that Optus long term international strategy is to continue the deployment of its international IP network which, allied to the Cable & Wireless global IP network, builds a solid foundation for lower cost transport for international voice/data services. On 10 August 2000, Optus confirmed that it is considering options for the future of its Consumer & Multimedia Business which include bringing in a partner or proceeding to a launch of digital interactive television. On 15 August 2000, Optus announced a special brand called Boost for the youth market which will offer a range of pre-paid mobiles and phone cards. Boost is the result of a strategic alliance between Optus and Boost Tel Pty Limited, a company with a team of experienced youth marketers who have developed such brands as Stussy, Mossimo and Globe. The pre-paid mobile phones will be available in non-traditional retail outlets including General Pants, Rebel Sport and Surf and Ski shops Australia wide. On 2 September 2000, Optus announced that XYZed, a wholly owned subsidiary of Optus, launched its wholesale DSL service, which will compete directly with Telstra in the $1.5 billion market for high speed broadband access. It is the first competitor to build a dedicated national DSL network. The company launches with a presence in 50 exchanges nationally and will continue to roll out its network targeting more than 100 exchanges where corporate and large enterprise businesses are located. XYZed will offer competitively priced, high speed, business quality DSL access to approximately 75% of Australian businesses. DSL technology makes it possible to deliver high-speed data over exiting copper phone lines. On 26 September 2000, Optus announced that it was in the process of seeking an equity partner for its satellite business. Optus believes that an appropriate partner will deliver substantial benefits including cost savings due to economies of scale and additional capacity, as well as providing access to substantially more satellites. On 27 September 2000, Optus announced that it was conducting an ongoing review of structural and strategic options for all three of its operating businesses, Data and Business Services, Mobile and Consumer & Multimedia. The announcement states that the company believes it appropriate to examine which structures for the three businesses will optimise Optus growth prospects and create the greatest value for shareholders. The review will include options which Optus has already been examining including an equity partnership in Consumer & Multimedia, a regional branding and equity alliance for its Mobile business or new investment partners. On 13 October 2000, Optus announced that it had obtained a 7.996% share of the issued capital of IBA Technologies Limited. This was consideration for the sale of Optus Health Solutions to IBA Technologies Limited which was announced on 26 May 2000. On 28 November 2000, Optus announced that it was successful in bidding for spectrum in the 27 GHz auction held by the Australian Communications Authority. Optus stated that the spectrum would be used to deploy a Local Multipoint Distribution System (LMDS) customer access network across Australia. LMDS technology delivers high speed data and voice services, can be implemented quickly, scaled up easily and provides businesses with a greater choice of communication options. Agility Networks, a wholly owned subsidiary of Optus, will use a wholesale model for marketing the LMDS network services. On 18 December 2000, Optus announced the sale of Dingo Blue, a wholly owned subsidiary, to AGL for A$22 million. Dingo Blue is an online service provider offering a suite of communications products and services. The announcement states that the sale will help forge close ties between the two great Australian companies. The sale will allow AGL to diversify and add value to clients, while Optus gains by a closer relationship with one of Australias leading companies. The announcement states that the partnership will result in the building of a significant new distribution channel for Optus and a growth opportunity for Dingo Blue.
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On 27 December 2000, Optus announced a wholesale communications deal to provide Primus Telecom with a national backbone network. The announcement states that Primus is expected to be able to access its new network in approximately six months. Optus stated that the deal will be accounted for in a similar manner to that of the national backbone leasing arrangement with AAPT. Optus will manage the network for Primus. On 10 January 2001, Optus announced that it would seek court resolution of an accounting issue raised by ASIC concerning the accounting treatment of wholesale cable capacity sales in the 1999/2000 financial year. The long running dispute relates to Optus financial accounts for the 1999-2000 financial year in which a profit of A$28 million from a capacity sale to AAPT was not recognised. In the same accounts, a A$82 million capacity sale was recognised. ASIC has questioned Optus accounting treatment and Optus has been seeking resolution since 1999. Optus announced that it would begin proceedings in the Supreme Court of New South Wales today. On 22 March 2001, Optus announced that it was successful in bidding for 3G spectrum in the 22 March 2001 2 GHz auction held by the Australian Communications Authority. The announcement stated that Optus paid a total of A$248.87 million for 3G spectrum. This included A$241.1 million for a national licence which covers 10 MHz in capital cities and 5 MHz in regional areas, plus Optus bought 5 MHz of unpaired spectrum in most capital cities for A$7.77 million. On 2 April 2001, Optus unveiled its plans to deliver Australias first 3G network by announcing a A$900 million infrastructure deal with Nokia, including a commitment for 3G applications development. On 26 April 2001, Optus announced that it had received a dividend of US$80 million (A$160 million) from its on-going investment in the Southern Cross Cable Network (Southern Cross). The announcement further stated that the Optus share of Southern Cross profits is expected to be approximately A$115 million, which will be booked in the Optus results for the year ended 31 March 2001, to be announced in May 2001. The announcement stated that the Southern Cross dividend will contribute to Optus cash flow in the year ended 31 March 2001. Further on-going and substantial dividend payments are expected to be received in the financial year ending March 2002 and future years, based on Southern Cross continuing its successful marketing program. On 27 April 2001, SAP, SAPMarkets and Commerce One announced the signing of a strategic alliance to offer integrated e-commerce solutions to businesses in Australia and New Zealand. The announcement stated that under the agreement, the companies will jointly identify, market and distribute e-commerce solutions and value-added services to selected customer accounts in targeted industries and markets. On 10 May 2001, Optus announced its audited results for the year ended 31 March 2001.
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CORPORATE DIRECTORY
Singapore Telecommunications Limited 31 Exeter Road Comcentre Singapore 239732 SHARE REGISTRARS SINGAPORE M&C Services Private Limited 138 Robinson Road #17-00 Hong Leong Centre Singapore 068906 SHARE REGISTRY AUSTRALIA Computershare Investor Services Pty Limited Level 2, 60 Carrington Street Sydney NSW 2000, Australia FINANCIAL ADVISER Morgan Stanley Dean Witter Asia (Singapore) Pte 23 Church Street #16-01 Capital Square Singapore 049481 LEGAL ADVISER AUSTRALIA Blake Dawson Waldron Level 41 Grosvenor Place 225 George Street Sydney NSW 2000, Australia LEGAL ADVISER SINGAPORE Allen & Gledhill 36 Robinson Road #18-01 City House Singapore 068877