OpenNet set for sale in proposed S$126m deal

SINGAPORE — OpenNet, the beleaguered company responsible for developing the Republic’s Next Generation Nationwide Broadband Network (Next Gen NBN), is set to be sold in a move which its potential buyers claim will improve the process of rolling out the platform.

The proposed deal, which was announced yesterday at a hastily-called press conference, will however come under close scrutiny given the links between the potential buyers and SingTel.

Previously, SingTel’s role as OpenNet’s key subcontractor had already elicited controversy on a few occasions given that it is part of the consortium which owns OpenNet. The other shareholders are Axia NGNetworks Asia, Singapore Press Holdings and SP Telecommunications.

Under the deal, which is subject to regulatory approval by the Infocomm Development Authority (IDA), OpenNet will be acquired by NetLink Trust through trustee manager CityNet in a deal worth S$126 million.

According to an SPH statement, the audited net asset value of OpenNet as at March 31 was S$136.5 million.

NetLink owns and manages the network’s passive infrastructure such as exchanges and the ducts and manholes where cables are pulled through.

NetLink is owned by SingTel but run independently by CityNet, whose Chairman Mr Yap Chee Keong said: “(The acquisition) will bring efficiency and benefits to consumers, while allowing the continuous development of a vibrant and competitive broadband market. And I would like to reiterate that this entity will continue to be subject to regulatory requirements of giving open access, and is still subject to the IDA’s oversight.”

The proposed acquisition comes after a long series of technical and operational hiccups by OpenNet that led the IDA to fine the company in 2011 and, a year later, impose tougher service standards. Last year also saw OpenNet appointing its third chief executive in two years.

At the press conference — where OpenNet executives were conspicuously absent — Mr Yap refused to comment on whether the deal was linked to its difficulties.

Instead, he praised the company for meeting the target of 95 per cent NBN coverage.

“We’ll work closely with (OpenNet) and continue the earlier success of the NBN rollout to achieve greater efficiencies for the next phase of growth,” Mr Yap said, adding that if the deal goes through, prices to downstream providers will continue to be non-discriminatory and regulated by IDA.

He also said that there is no issue of irregularity with the acquisition. Although SingTel is the sole unit-holder of NetLink, its operation and management rest with CityNet, which is independent of SingTel and has an independent board of directors, Mr Yap said.

In a statement, the IDA confirmed that its approval is needed for any transaction that results in a party controlling 30 per cent or more of a telecommunications licensee.

In assessing the deal, IDA said it will “take into account all relevant factors and ensure that the proposed transaction does not result in a substantial lessening of competition in any telecom market or harm the public interest.”

The next stage in the process is for IDA to conduct a public consultation as part of its assessment.

Meanwhile, although CityNet was upbeat about the implications of the deal for customers, analysts were less convinced. Mr Clement Teo, Senior Analyst at Forrester Research, expressed doubts about whether the deal would have much of an impact: “It is unlikely that this news will affect consumers because, materially, it is still the same company. It’s just a change of name. CityNet will inherit the resources and manpower from OpenNet, and OpenNet is already committed to a schedule set by IDA.”

Parties with a vested interest in the successful rollout of the fibre network have already started assessing the implications of the proposed deal.

Ms Jeannie Ong, Chief Marketing Officer of StarHub, said the company will take some time to study how this will affect the industry and the company’s position. “We welcome any steps to improve OpenNet’s poor performance on service provisioning record in respect of non-residential customers. Given its wide-ranging impact, we look forward to IDA’s public consultation on this transaction,” she said.

And while SingTel’s involvement is more complicated because of its ownership of NetLink, a company spokesperson said any move which gets more customers on to the fibre network as soon as possible is to be welcomed.

“Commercially, it makes sense to have an efficient rollout of the fibre network as more of our customers will have access to the faster speeds and the enhanced services fibre brings,” the spokesperson told TODAY. ADDITIONAL REPORTING BY PETER YEO