In a surprising move today, StarHub said it is set to acquire a majority stake in the broadband unit of rival Singapore telecom player MyRepublic, as it boosts its share in the market.
The number two telecom operator here will shell out S$70.8 million for 50.1 per cent of shares in MyRepublic Broadband, a new unit set up to run consumer and business broadband services after the acquisition.
Another S$92 million will be in the pot if the unit meets future financial performance matrices, according to a StarHub announcement this morning.
In addition to equity, StarHub has agreed to refinance S$74.2 million of debt for MyRepublic for a period of three years, on completion of the deal, which is expected in December this year and subject to regulators’ approval.
The proposed acquisition means that StarHub will gain the 6 per cent of the Singapore broadband market that MyRepublic holds, bringing its share here to 40 per cent.
It is unclear how products and services will evolve for the two telecom players here, though MyRepublic will continue running its services and expects to incorporate StarHub’s connectivity, over-the-top content, cloud gaming and other experiences.
What the new broadband unit will immediately benefit from is the ability to tap on StarHub’s network. It may not have to separately maintain a fibre broadband setup and can instead rely on its larger parent’s extensive network to save on costs.
The deal also reflects the difficulties facing telcos here, as competition in the past several years has hit bottomlines for even the likes of Singtel, which owns a large part of the Singapore market and is diversified with stakes in overseas telcos.
When MyRepublic opened shop almost a decade ago to sell fibre broadband services, the market was newly liberalised in Singapore and new entrants managed to muscle in.
Helmed by Malcolm Rodrigues, formerly from StarHub, the startup turned to digital marketing and referrals to boost its sign-ups. Despite lacking its larger rivals’ scale and add-on content like pay-TV, it managed to carve a niche in a new market.
In 2016, MyRepublic was widely expected to win a 4G licence in Singapore, only to be outbid by TPG Telecom to be Singapore’s fourth telco.
At one point, some in the market even speculated that it would bid for M1, though in reality, it would have been unrealistic to expect the smaller player to swallow up its much larger rival.
MyRepublic has since sold mobile services as a virtual operator, though its market presence isn’t as substantial as rivals such as Circles.Life, which had started earlier.
Considering the low prices that TPG Telecom has had to price its services now, missing out on a 4G licence might have been a bullet dodged for MyRepublic five years ago.
In terms of growth, of course, this meant MyRepublic coud not expand to a scale that would make it more attractive for a public listing, which it had targeted for 2018.
Now, with StarHub onboard, it will look to go public again “in the near future“, as it said recently.
Indeed, in the media release from StarHub today, the bigger telco says it could also benefit from being part of any potential listing in future. Plus, it could finally say it has a regional reach through MyRepublic’s presence in Australia and New Zealand.