Exclusive -Temasek seeks to sell $3.1 billion stake in Thailand's Shin Corp to SingTel -sources

By Saeed Azhar and Denny Thomas

SINGAPORE/HONG KONG (Reuters) - Singapore state investor Temasek Holdings Pvt Ltd is seeking to sell its $3.1 billion (1.8 billion pounds) stake in Thai telecom company Shin Corp, according to people familiar with the matter, and has approached its SingTel unit as a possible buyer.

Temasek, which owns 41.6 percent of Shin Corp through a subsidiary, held talks with Singapore Telecommunications Co, as SingTel is formally known, late last year, said the people, who declined to be identified as the information is not public. Those discussions have since stalled amid political tensions in Thailand, they said.

The move by Temasek, which oversees $170 billion in assets, is in line with the state investor's plans to consolidate portfolio companies in industry groupings. This would be its first move toward bringing its telecoms assets under one roof, analysts said, potentially creating a regional giant.

The Temasek stake in Shin Corp, founded by former Thailand prime minister Thaksin Shinawatra, is worth $3.1 billion by current market value.

Shin Corp's shares now trade more than 50 percent above the price paid in 2006 by a Temasek-led consortium, that included Chinese-Thai businessman Surin Upatkoon, when it bought 96 percent of the Thai firm for a total of $3.8 billion.

"At a fair price such a deal would make sense for SingTel," Chris Lane, senior analyst at Sanford C. Bernstein in Hong Kong who covers Asia-Pacific telecommunications. SingTel is 52 percent-owned by Temasek.

Shin Corp owns 40.5 percent of Thailand's biggest mobile telecoms company, Advanced Info Service Plc. SingTel already has a 23 percent stake in AIS: Adding the Shin Corp stake would cement its position in a bigger market and offset sluggish growth in mature economies where it's also present, like Australia.

"SingTel executives are involved in the day-to-day operations of the company," said Bernstein analyst Lane. "Buying the stake from Temasek avoids the possibility of another 'telco' securing a significant interest in AIS."

Temasek's telecoms strategy mirrors that it has tried to deploy in other business segments - with varying degrees of success.

Last year its financial services portfolio company DBS Group Holdings Ltd made a bid for Bank Danamon Indonesia Tbk, but it failed to get approval from Indonesian regulator. The future of its 18 percent stake in London-based bank Standard Chartered PLC is a constant source of speculation for bankers, who have previously suggested merging Standard Chartered with DBS.

POLITICAL STALEMATE

The slowdown in Shin Corp deal talks makes it the second potential transaction in Thailand to be put on the back burner due to political stalemate. ING Groep's planned sale of a 31 percent stake in TMB Bank Pcl has also hit roadblocks, Reuters previously reported.

Shin Corp occupies a position of symbolic importance in Thailand. Along with Thai investors, Temasek and Surin Upatkoon bought the 96 percent Shin Corp holding in 2006 through a vehicle known as Cedar Holdings Ltd. While Cedar has since sold most of its ownership, Temasek remains a Shin Corp shareholder through a subsidiary called Aspen.

The change in its ownership triggered accusations of insider trading and tax evasion as the family of then Prime Minister Thaksin Shinawatra and others involved received $1.9 billion tax-free.

Thaksin insisted at the time that the sale satisfied all the rules in a country where share sales conducted through the stock market are not taxed. Protests in Bangkok followed, ultimately leading to a coup that ousted Thaksin.

Thailand is one of 25 countries in which SingTel operates, with more than 500 million subscribers in total and more than three-quarters of its core earnings coming from outside Singapore. The company had a cash flow of S$2.5 billion at the end of December.

But SingTel has been seeking to overhaul a portfolio of telecoms investments that include stakes in Australia's Optus, India's Bharti Airtel Ltd, Globe Telecom Inc in the Philippines and Indonesia's PT Telkomsel. Last year, it unsuccessfully tried to sell the Australian satellite business.

A spokesman for Temasek Holdings declined to comment on the talks, but added, "We are a long term investor in Asia including in ASEAN."

A Shin Corp official in Bangkok declined to comment, while a SingTel spokeswoman also declined comment.

SingTel shares fell 0.6 percent on Tuesday, while the benchmark Strait Times index was steady by mid-morning. Shin Corp shares were down 2.3 percent, while the Bangkok index was 1.2 percent lower.

(Additional reporting by Khettiya Jittapong in Bangkok and Rujun Shen in Singapore; Editing by Kenneth Maxwell)